Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — POSTS AND TELECOMMUNICATIONS

National Giro

Mr. Dykes: asked the Minister of Posts and Telecommunications whether he is now in a position to make a statement on the latest developments with Giro and the prospect for Giro transactions for the rest of the current trading period.

Mr. Leslie Huckfield: asked the Minister of Posts and Telecommunications whether he will now make a further statement on the future of the National Giro.

The Minister of Posts and Telecommunications (Mr. Christopher Chataway): I hope to be able to make a statement soon.

Mr. Dykes: I appreciate that it may be difficult to give a longer answer now, but does not my right hon. Friend agree that there is considerable uncertainty about the Giro and that the sooner it is allayed, the better? If the question mark against its commercial viability continues, changes might, even with regret, be necessary.

Mr. Chataway: I appreciate what my hon. Friend says. I am anxious to get an answer quickly, but I am more anxious to get the right answer.

Mr. Crawshaw: Does the right hon. Gentleman agree that now that the teething troubles are over, the prospects of the Giro being a viable enterprise are ap-

parent? Will he give an assurance that it will not be axed, as so many other things under the Tory Government?

Mr. Chataway: As the hon. Gentleman indicated, this interprise got off to a very unfortunate start. There are certainly errors to be retrieved, but I am not in a position to comment further today.

Mr. Gregor Mackenzie: Is the right hon. Gentleman making any progress in persuading his colleagues in the Government to encourage their Departments to use this service?

Mr. Chataway: I cannot add to my reply to that point on a previous occasion that I answered Questions.

Commercial Radio

Mr. William Hamilton: asked the Minister of Posts and Telecommunications what consultations he has had in the last month with interested parties concerning the introduction of commercial radio.

Mr. Chataway: One, with representatives of the Advertising Standards Authority.

Mr. Hamilton: Why did the right hon. Gentleman make the statement that there would not be a surfeit of "pop" on the commercial radio network? Is it not the case that this is all we shall have?

Mr. Chataway: No. The agreements which govern the broadcast of recorded music make it almost certain that the new commercial stations will not be able to put out as a high a volume of "pop" as Radio One. If it is "pop" music that the hon. Gentleman objects to, I should have thought that that wavelength would be the object of his ire. The programmes which will be broadcast by the commercial stations will, as the White Paper said, have to achieve a better balance than that.

Mr. Mawby: Can my right hon. Friend say what is wrong with "pop" when the B.B.C., in particular, supplies a market which demands it? Does he agree that the Musicians' Union and other interested bodies must be assured that "needle time" will be reduced to a proper level?

Mr. Chataway: I agree with my hon. Friend: I see nothing wrong with "pop".


I am rather puzzled by the apparent assumption among Labour Members that sweet music is always to be preferred to "pop"—it is probably something to do with the generation gap. On the question of recorded music, the "needle time" agreements, to which my hon. Friend referred, will have to be a matter for negotiation between the parties concerned.

Mr. Gregor Mackenzie: Will the right hon. Gentleman take it from me that perhaps my hon. Friends feel, as I do, that there is more money in "pop" than in sweet music? It is very sweet "pop". Now that the right hon. Gentleman has had the opportunity to discuss the White Paper with the Advertising Association, the broadcasting associations and the trade unions, when are we in Parliament likely to be able to make our voices heard? When would the right hon. Gentleman like to hear our views on the important subject of commercial broadcasting?

Mr. Chataway: It is not for me to make announcements about future debates in the House, but my right hon. Friend the Leader of the House has made it clear that there will be a debate on this subject in due course.

Mr. Dykes: asked the Minister of Posts and Telecommunications when he expects to be able to announce a timetable for the establishment of commercial radio in London.

Mr. Chataway: This will not be possible until legislation authorising the provision of the new service has been enacted.

Mr. Dykes: Does my right hon. Friend not agree that, although it may seem surprising to many members of the Opposition, many people in London are looking forward with some anticipation, and indeed eagerness, to the creation of a commercial radio service in Greater London? Therefore, does he not also agree that this should be governed by two important criteria: first, that it should be brought in as soon as possible to avoid unnecessary delay; secondly, that there might be another Government look at the proposal for two stations in London to see whether more might not be created?

Mr. Chataway: I take note of what my hon. Friend says and I entirely agree

that it is a limited number of people who have an aversion to an enlargement of choice in this matter.

Mr. Whitehead: Could the Minister assure the House that he will drop the proposal, trailed in the White Paper, for a newsvending station operating in London? Will he not accept that the cost of such an operation would demand resources at least equivalent to Independent Television News and an organisation controlled by the I.B.A., just as is I.T.N., and not susceptible to the whims of financial gain?

Mr. Chataway: No, I would not accept any of that. The majority of people involved in radio broadcasting, of whatever kind, are impressed by a number of the all-news stations that operate in the United States. It is not true that radio news is as expensive as television news, and whereas no decisons have been taken about the best source for radio news, this is one suggestion that is worth considering.

Public Telephones (Station Platforms)

Dr. Gilbert: asked the Minister of Posts and Telecommunications if he will issue a general direction to the Post Office that they seek to install public telephones on all station platforms.

Mr. Chataway: No, Sir. This would not be a suitable subject for a general direction.

Dr. Gilbert: That is the second disappointing reply we have had on this subject. As the Minister will not do anything to try to get us telephones on trains, will he get them on railway station platforms where we are equally the prisoners of British Rail? There are no telephones on the platforms at Euston. At Birmingham they are on the right side of the ticket collector, but a long way from the platforms. At many stations they are even outside the premises.

Mr. Chataway: I am sorry to cause disappointment to the hon. Gentleman, but I should be abusing my powers under the 1969 Act if I were to issue general directions on the subject.

Mr. Money: In his discussions on this subject with British Rail, will my right


hon. Friend stress the special needs of the disabled?

Mr. Chataway: I am sure that the Post Office, which has responsibility in this matter, will take account of what my hon. Friend has said.

Postal Charges

Mr. Atkinson: asked the Minister of Posts and Telecommunications what consultations he has had with the Post Office Board about their plans for an increase in the first class letter rate of 92 per cent. above the rate introduced on 15th February.

Mr. Chataway: None, Sir. I know of no such plans.

Mr. Atkinson: Is the Minister aware that if there is to be an increase in the cost of postage stamps from five old pence as was the situation on 15th February last, to four new pence next 15th February, this will represent a 92 per cent. increase? Does this not give credence to the view, held by many members of the Union of Post Office Workers, that the Minister has impressed upon the Chairman of the Post Office that he should take steps to exaggerate the impact upon the price of stamps of wage agreements which are now going through? Would not the right hon. Gentleman agree that an increase in stamp charges of 92 per cent. in 12 months is fantastic when compared with the award to postmen of a mere 9 per cent.?

Mr. Chataway: The hon. Gentleman will bear in mind that when the present Government came to power we found the Post Office with the largest-ever deficit on the postal side, and that is a contributory factor in the situation.
I have received no proposal of the kind the hon. Gentleman mentioned. His Question contains the words:
above the rate introduced on 15th February.
I take it that he means the rate prevailing before 15th February.

Mr. Geoffrey Finsberg: Could my right hon. Friend impress on hon. Members opposite the fact that any statements alleged to have been made about increases will first have to come to the Post Office Users' National Council, as indeed will any suggestions for putting telephones on trains and in stations?

Mr. Chataway: I entirely agree with my hon. Friend the Member for Hampstead (Mr. Geoffrey Finsberg) who is a much valued member of the National Council.

Mr. Gregor Mackenzie: May I remind the Minister that when last year he announced the largest single increase we have ever had in postal charges, he told the hon. Member for St. Ives (Mr. Nott) that the increases should be sufficient for the remaining quinquennium period to 1973–74? Does he still take this view in the light of what the Chairman of the Post Office said after the Hardman Committee reported?

Mr. Chataway: No. The Chairman of the Post Office has made it clear that he is considering putting to the Government and to the Post Office Users' National Council proposals for a further increase.

Mr. Gregor Mackenzie: But the Minister of State in reply to my hon. Friend the Member for Tottenham (Mr. Atkinson) said he had heard no suggestion that there should be an increase at all. As we are rather puzzled by this statement, would the right hon. Gentleman explain it a little further?

Mr. Chataway: I heard no suggestion that there should be a 92 per cent. increase over the rate introduced on 15th February. As the House will know, and as has been made clear on a number of occasions in the House, the increase in costs since last summer makes it more than probable that there will need to be an increase earlier than was envisaged in the statement last July.

Postcodes

Sir R. Russell: asked the Minister of Posts and Telecommunications to what extent the public is co-operating in using postcodes.

Mr. C'hataway: This is a management matter for the Post Office, but I understand that the response so far varies from area to area.

Sir R. Russell: Is my right hon. Friend aware that these postcodes have placed more burdens on the general public, particularly when people initiate correspondence? Can he say what his predecessor in office could not tell me two years ago


—what offset or economy there will be as a result of the introduction of these postcodes, if not in terms of money, in terms of manpower?

Mr. Chataway: I cannot give my hon. Friend figures, but the postcodes undoubtedly will facilitate sorting in this as in most other Western countries. That is the reason postcodes are being introduced.

Hardman Committee

Mr. Kenneth Baker: asked the Minister of Posts and Telecommunications what general directions he intends to give to the Post Office Corporation arising from the recommendations of the Hardman Committee.

Mr. Chataway: None, Sir; a general direction would not be appropriate. In any case, the Post Office has undertaken to accept the recommendations.

Mr. Baker: Has my right hon. Friend seen those sections of the report which say that the management side and union side in the Post Office have a cosy relationship which leads to inefficiency, excessive overtime and falling productivity? As this is not the first time such comments have been made about the Post Office, what does he intend to do about it?

Mr. Chataway: Obviously, I am discussing the Hardman Committee's Report with the Post Office, which recognises its value and also recognises that there is now a unique opportunity to reconsider the structure and scope of the Post Office services appropriate to the 1970s.

Mr. Charles Morris: Is the right hon. Gentleman aware that, following the Report of the Hardman Committee, one distinguished member of the Post Office staff side said that the Post Office staff had lost faith in their employers? What action does the right hon. Gentleman propose to take to restore such faith and to bring about a harmonious relationship between the staff and their employers?

Mr. Chataway: The Hardman Committee makes a number of suggestions which are directed towards that objective, and I know that those suggestions are being taken seriously by the Post Office.

Mr. Gregor Mackenzie: Is the Minister aware that, in the view of many of us, the Report of the Hardman Committee lacked clarity on the important subject of incremental scales, a subject which affects all grades in the Post Office? Could the Minister help by suggesting to the Post Office a precise policy on incremental scales, spelling it out in greater detail?

Mr. Chataway: I am sure that the Post Office will take note of what the hon. Gentleman said.

Post Office (Separate Corporations)

Mr. Waddington: asked the Minister of Posts and Telecommunications what steps he proposes to take as a result of the recommendation of the committee of inquiry into the postal pay dispute that the Post Office should be split into two separate corporations.

Mr. Chataway: I have noted the Committee's comments, but I do not believe that there would be advantage in making so fundamental a change to the structure of the Post Office at this stage.

Mr. Waddingon: Would the Minister agree that the Post Office Corporation is an unnecessarily vast and unwieldy organisation and that no useful purpose can possibly be served by trying to run two entirely different Post Office functions, posts and telecommunications, under one board?

Mr. Chataway: Without entering into argument with my hon. Friend, I would say that whereas there was a case for creating two separate corporations before the 1969 Act, I do not see any gain certain enough or large enough to justify further legislation and a further upheaval now.

Mr. Atkinson: Would the Minister reconsider his answer to me earlier when I said that the award to the postmen did not warrant an increase in stamp charges of 92 per cent., namely from five old pence to four new pence? The answer he then gave was that he had inherited a gross deficit. Is this not because of the separation of the services, and nothing to do with the wage award? Therefore, will he now be honest and answer the U.P.W. criticisms which accuse him of telling the Chairman of the Board that he must exaggerate the price increase to


poison the mind of the public against wage rises in the public sector?

Mr. Chataway: There has been no exaggeration at all by the Board about the effect of wage increases, and I do not believe that the Hardman Committee, majority or minority reports, suggested that there had been. Certainly the deficit is in no way due, as the hon. Gentleman suggests it is, to the separation of the two services.

Seven-figure Telephone Numbers

Sir R. Russell: asked the Minister of Posts and Telecommunications if he will make a statement on the results of changing over to seven-figure telephone numbers.

Mr. Chataway: I am told by the Post Office, which is responsible, that customers have responded well to the change-over in the six cities where all-figure numbering has been introduced.

Sir R. Russell: Would not my right hon. Friend agree that although seven-figure telephone numbers are obviously necessary for trunk calls, they are not necessary so much for local calls, which form the vast majority of calls made? Would he ask the Post Office to consider possibly reverting in some respect to the old exchanges, which were much easier to remember not only for subscribers but also for operators?

Mr. Chataway: I agree that there were advantages in the old system in that it was much easier to remember. There would be very great difficulties in having a different system for local calls from that for trunk calls. In any case, this decision was taken some 5½ years ago, and there is no going back on it now.

Oral Answers to Questions — ENVIRONMENT

Foulness (Development)

Mr. McCrindle: asked the Secretary of State for the Environment whether he will ensure that the development of the deep-water port and industrial complex at Foulness may proceed in advance of the building of the airport.

The Secretary of State for the Environment (Mr. Peter Walker): No, Sir. The Government will examine any such

proposals in the light of good regional planning.

Mr. McCrindle: Would not my right hon. Friend agree that the location of the airport having now been decided, it is in the interests of employment prospects locally not to hold back too long before considering further the industrial aspect of this area? If we are to regain any international trade from Rotterdam, the deep-water port aspect of the matter is becoming urgent.

Mr. Walker: This is a very important decision which we have to make and there are many factors, environmental, transportation and many others. It is right that the Government should look at the whole problem in terms of good planning.

General Improvement Areas

Mr. Julius Silverman: asked the Secretary of State for the Environment how many general improvement areas have been defined and declared by local authorities under the Housing Act 1969.

The Under-Secretary of State for the Environment (Mr. Paul Channon): 134 general improvement areas have been declared by 98 local authorities in England.

Mr. Silverman: Will the Minister say whether he is satisfied with this progress, bearing in mind the resolutions and definitions involved are only the first stage of the programme of creating general improvement areas? What steps is he taking to make local authorities press on with these developments?

Mr. Channon: One is never satisfied with the progress. One would always like to go faster. But many local authorities are pressing ahead with this, and my right hon. Friend's general improvement campaign will help. The hon. Member may be interested to know that Birmingham has declared seven G.I.A.s, five of them since last June, and is pressing ahead very fast.

Clayton-le-Moors (Trunk Road)

Mr. Arthur Davidson: asked the Secretary of State for the Environment what part of Clayton-le-Moors will be


affected by the new trunk road for which his Department is responsible.

The Under-Secretary of State for the Environment (Mr. Michael Heseltine): Stage 1 of the proposed Calder Valley route is now being investigated. This would pass through the Clayton-le-Moors area but it is not possible to say through which parts.

Mr. Davidson: I understand the Minister's difficulties, but will he come to an early decision about the exact route that this road is likely to take? Is he aware that the present uncertainty is causing great anxiety to my constituents, many of whom are in an impossible position because they cannot sell their houses and do not know whether to spend money on improvements?

Mr. Heseltine: The results of our investigation are expected this year. Dependent on this investigation, the draft proposals for the route affected at Claytonle-Moors should be published in 1972.

Mr. Waddington: Recognising how vital it is for industrial growth in North-East Lancashire that a speedy start be made on this, would the Minister indicate when construction is likely to start?

Mr. Heseltine: Assuming that there are no delays in the provision of the capital or other delays, work should start in 1975 and be completed in 1977.

Compulsory Purchase and Planning Blight (Compensation)

Mr. Benyon: asked the Secretary of State for the Environment if, following his review of the matter, he will introduce legislation to revise the law governing compensation in cases involving compulsory purchase, in view of the need for changes in the law in relation to areas designated for new towns.

Mr. Blaker: asked the Secretary of State for the Environment when he expects to announce his proposals regarding the reform of the law regarding compensation for planning blight.

Mr. Peter Walker: I shall announce details of our proposals when our comprehensive review of the Compensation Code has been concluded. This review is going ahead with all speed.

Mr. Benyon: Will my right hon. Friend accept that there are strong feelings of injustice at present about the operation of the present law and that this is particularly so among farmers, who find that the compensation which they are receiving is insufficient for them to restart farming in a like manner elsewhere? Will he have strong regard for the representations which have been made by the National Farmers' Union and others on this question?

Mr. Walker: Yes, Sir, but I ask my hon. Friend to regard the total complexity of the problem, which involves not just farmers, shopkeepers and commercial interests, but the owners of household property, problems of planning blight, roads and so on. Therefore, it is an immense task which we are undertaking. We are doing it with all speed.

Mr. Blaker: I fully understand the complexity of the task and the importance of getting the decisions reached. Would the Minister say whether he hopes to introduce legislation in the next Parliamentary Session?

Mr. Walker: I cannot give that assurance, but I assure the hon. Gentleman that as soon as we have come to conclusions, we shall publish a White Paper and enter into discussions with the various organisations concerned, with the N.F.U., farming interests, and other people. I hope to introduce legislation at the earliest possible date.

Mr. Leonard: Does not the right hon. Gentleman consider, as the previous Government announced over a year ago that it would be right to introduce legislation on planning blight, that a decision is long overdue? There are thousands of households throughout the country who are suffering from uncertainty, inconvenience and hardship because of the Minister dragging his feet on this matter.

Mr. Walker: On the contrary, when I arrived at the Ministry I discovered that the work on planning was totally inadequate.

Sir D. Walker-Smith: Some of us have been urging action in regard to this matter for a great many years. Will the Minister confirm that his proposals will include an extension of the provisions for compensation for any injurious


affection due to motorways, airfields and the like, where no land is compulsorily taken, which is a gap in the present law? Will he also improve the position with regard to compensation at site value in respect of clearance areas, where some hardship is suffered at present?

Mr. Walker: I know the long interest that my right hon. and learned Friend has taken in this topic. He will understand that I cannot at this stage start giving the detail of what our plans will be. But I assure him that the matters which he has mentioned will be given careful consideration.

Putney

Mr. Hugh Jenkins: asked the Secretary of State for the Environment if he will make a statement on his recent official visit to Putney.

Mr. Peter Walker: The purpose of my visit to Putney was to open the 5000th dwelling built by the present Borough of Wandsworth. All the current slum areas are expected to be eradicated within the next five years and the council is now embarking on an extensive rehabilitation programme. It must be congratulated on its performance.

Mr. Jenkins: Would not the right hon. Gentleman agree that the programme on which he readily congratulates Wandsworth Borough Council was initiated and mostly carried through under a Labour administration? Will he join in the general rejoicing when Wandsworth is restored to a Labour administration tomorrow?

Mr. Walker: No, Sir. The hon. Member's observations are as inaccurate as his predictions.

Harlow New Town

Mr. Tebbit: asked the Secretary of State for the Environment when he now expects to announce his decision on the future expansion of Harlow New Town.

Mr. Peter Walker: There will be no avoidable delay in coming to a decision on the expansion of Harlow, but this must be considered in the light of the planning strategy emerging from the report of the South-East Joint Planning Team. Before publishing any draft expansion proposals I shall also wish to

consult the local authorities and the development corporation.

Mr. Tebbit: May I express my gratitude for that reply. My right hon. Friend will be aware that formerly it was held that the Roskill Commission's Report was holding up this decision. I should like to be assured that my right hon. Friend is aware of the urgency of this matter, because of both the shortage of housing, especially second-generation housing, and the shortage of jobs, which is growing because industrialists do not know whether they can expand, and some are talking of leaving the town because of that fact.

Mr. Walker: Such are the activities of my hon. Friend that it is impossible not to be aware of the urgency of this problem.

Dimensions on Plans (Metrication)

Sir D. Walker-Smith: asked the Secretary of State for the Environment (1) what instructions have been given, a ad under what powers, requiring the dimensions on plans accompanying applications for planning permission to be expressed metrically;

(2) what instructions have been given, and under what powers, requiring the dimensions on plans submitted in accordance with building regulations to be expressed metrically.

Mr. Peter Walker: No such instructions have been given.

Sir D. Walker-Smith: Would my right hon. Friend take that gratifying answer a little further and issue guidance to local planning authorities that they should not individually impose any such requirements in respect of plans accompanying these applications?

Mr. Walker: We are considering what advice to give local authorities on this subject. Certainly we shall not be suggesting that they impose this particular system.

Mr. Robert Cooke: Would my right hon. Friend say why the competition for the new parliamentary building was conducted entirely in metric?

Mr. Walker: That is a question of which I should need notice.

Teesside (Roads)

Mr. Sutcliffe: asked the Secretary of State for the Environment if he will now announce his decision on the two public inquiries held concurrently in September, 1970 relating to the A19 Teesside diversion trunk road proposals stage 1 and to the associated planning proposals by the Teesside County Borough Council for a link road in Middlesbrough on the eastern side of the proposed A19/A66 interchange.

Mr. Heseltine: I invite my hon. Friend's attention to my hon. Friend's answer to his previous question on 1st March. The issues are complex but I hope that my right hon. Friend will soon be able to announce a decision.—[Vol. 812, c. 338.]

Mr. Sutcliffe: I appreciate that I have been a perfect nuisance to my hon. Friend about this and that he has shown great courtesy in the matter. But in view of the fact that eight months have now elapsed since the inquiry, and that this is the crucial junction in Teesside, will my hon. Friend get his Department working flat out on it so that we may have an urgent decision and so that my hon. Friend can at least match the noble Lord, the Minister for the Arts, in giving us satisfaction in the North?

Mr. Heseltine: Far from being a perfect nuisance, my hon. Friend has been a perfect Member of Parliament. Certainly we are well aware of the urgency.

Mr. Mulley: The hon. Gentleman will recall that the House recently passed legislation restricting the rights of individuals to object on the basis of getting speedier decisions in these matters. Will the hon. Gentleman undertake that his Department will try to get out decisions more quickly, in view of the great concern which has been expressed at the delays?

Mr. Heseltine: We would never dream of using those powers if we felt that they were an abuse of individual rights in any area.

London Boroughs (Secretary of State's Discussion)

Mr. Atkinson: asked the Secretary of State for the Environment what sub-

jects he intends to discuss at his June meeting with the London boroughs.

Mr. Channon: My right hon. Friend will be writing to the boroughs in due course and will suggest in his letter the main topics to be discussed.

Mr. Atkinson: Does the hon. Gentleman agree that normal family relationships are cruelly distorted when teenage youngsters are compelled to sleep with or in the same room as their parents? Is it not a good principle of civilisation that normal families should have access to and the privacy of their own lavatories? When the hon. Gentleman meets the London boroughs, will he tell them that he expects them to give the highest priority to the rehousing of families where teenage children are sleeping in the same bedrooms as their parents and where families have to go through someone else's bedroom or dining room to get to a lavatory at night? Should not these families have the highest priority for housing?

Mr. Channon: Certainly the problem of London's housing is extremely difficult, and I have great sympathy with what the hon. Gentleman said. My right hon. Friend has urged the London boroughs on many occasions to co-operate in this matter, and I believe that they are doing so.

Mr. Atkinson: It is on the agenda?

House Buyers (Rights)

Mr. Golding: asked the Secretary of State for the Environment whether he has yet made a decision on the introduction of legislation relating to the rights of house buyers as proposed by the Law Commission for England and Wales.

Mr. Channon: The Law Commission's proposals are still under consideration.

Mr. Golding: Is the hon. Gentleman aware that houses in my constituency, including the Loggerheads, have developed very serious structural defects within a few years of being built and that young owner-occupiers find that they have no means of redress either through the courts or through the National House Builders Registration Council to remedy them? Is not it time that builders were made to face the financial consequences of their jerry building?

Mr. Channon: Certainly I agree with the hon. Gentleman. I do not know the specific case in his constituency to which he referred. If he will send me details, I will look at them. The National House Builders Registration Scheme now covers about 95 per cent. of new house building and is a worthy safeguard to new purchasers. Certainly we have to do everything in our power to support it.

Mr. Dan Jones: Can the Minister say what is the responsibility of local authorities in the matters so properly drawn to his attention by my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding)?

Mr. Channon: I understood the Question to be related to private house buyers. New building is a matter for the National House Builders Registration Council and its voluntary scheme. Certainly we are giving the fullest consideration to the proposals of the Law Commission, but I am not yet in a position to make a statement.

Sir D. Walker-Smith: Further to the point raised by the hon. Member for Burnley (Mr. Dan Jones), is not it a fact that there are some local authority powers in respect of building regulations and the like but that the safeguards and standards of the National House Builders Registration Council go considerably beyond those local authority requirements?

Mr. Channon: My right hon. and learned Friend is quite right. There are the building regulations responsibilities of the local authority, but the N.H.B.R.C. scheme goes a great deal further.

Palace of Westminster (Carpeting)

Mrs. Joyce Butler: asked the Secretary of State for the Environment how many complaints he has received from staff in the Palace of Westminster about minor electric shocks received from carpeting; and what action he is taking to prevent this annoyance when new furnishings are introduced into the building.

Mr. Channon: Five. In each case, the carpet concerned was quickly and successfully treated with anti-static solution. I am watching the problem carefully and meantime I would like to assure the hon.

Lady that it should not arise as regards the main areas of carpeting in the House.

Mrs. Butler: Is the hon. Gentleman aware that the trouble still continues, that there has been no improvement, and that the shocks, though slight, are nevertheless uncomfortable and occur quite frequently in certain types of jobs to certain people, both men and women? Is the hon. Gentleman continuing the cure treatment, and has he given instructions that this type of carpet shall not be laid in the future?

Mr. Channon: The carpets have been treated with anti-static solution. I understood that the problem had been solved. If the hon. Lady says that it has not been solved, perhaps she will give me details, and I will look at them.

G.L.C. Mortgages

Mr. Kenneth Baker: asked the Secretary of State for the Environment how much the Greater London Council has provided for council mortgages in the years 1969–70 and 1970–71.

Mr. Channon: £11·9 million in 1969–70 and £49·1 million in 1970–71.

Mr. Baker: Is my hon. Friend aware that that last figure represents a tenfold increase over the figure three years ago when the Labour Government slapped on controls? As the G.L.C. now receives applications at the rate of 400 to 500 a week, throwing the emphasis upon smaller and older houses, is not it a significant contribution made by the Tory-controlled G.L.C. to London's homeless?

Mr. Channon: All objective and fair-minded people will agree that it is a remarkable contribution.

Mr. Hugh Jenkins: Is the hon. Gentleman aware that every report ever made on the subject has been quite clear that the major need in London is the building of houses for letting? On this count, has not the Tory-controlled G.L.C. failed lamentably?

Mr. Channon: That is a totally unfair distortion of the position.

Mr. Freeson: Will the hon. Gentleman reconsider that last reply and accept that there has been a major reduction in the


number of housing starts per year by the Greater London Council in the last three years, and is not that a process which is in urgent need of a complete reversal? There is a need for an immediate increase in local authority building by the G.L.C., as there is by other borough councils in London, in order to get over the problems which have been created by a reduction of one-third—10,000 housing starts—in the last three years by the Tories on an annual basis of housing construction.

Mr. Channon: We all know that the hon. Gentleman is very sensitive on this matter. However, I am answering a Question, to which he should address himself, about the amount of council mortgages, which his Government reduced to the point of utter meanness.

Green Park Underground Station (Public Park)

Sir R. Thompson: asked the Secretary of State for the Environment if he will take immediate steps to secure the removal of the remaining contractors' equipment and materials from the site above Green Park Underground Station and restore this part of the park to public use.

Mr. Channon: I appreciate my hon. Friend's concern but I cannot meet his request as the area will be needed again in the near future as a working site if the proposed Fleet Line goes ahead.

Sir R. Thompson: Is my hon. Friend aware that the position is becoming quite intolerable? It is years since the original construction was started and completed. A large area of the park has been sequestrated from people who should have the enjoyment of it. My hon. Friend gives no term to the length of time that we may have to wait before this miserable collection of shacks can be cleared.

Mr. Channon: I agree with my hon. Friend that the use of Green Park for this purpose is most objectionable. However, it would be unfortunate if an attempt were made to remove all the rubbish only for it to start again in a few months' time.

Central Housing Advisory Committee

Mr. Geoffrey Finsberg: asked the Secretary of State for the Environment

what meetings the Central Housing Advisory Committee held during April, 1971, and what decisions were taken concerning the Committee's future programme.

Mr. Channon: The Committee met on 26th April under the Chairmanship of my right hon. Friend the Minister of Housing and Construction. It was agreed that for the future meetings should be called as necessary to deal with specific housing matters. A further meeting was fixed for July.

Mr. Finsberg: Will my hon. Friend consider asking the Committee to prepare a report on closer involvement of council tenants in the management of their estates, thus following the excellent example of the Conservative-controlled G.L.C. and the London Borough of Camden?

Mr. Channon: I certainly take note of what my hon. Friend says, and I shall take the Committee's view on the matter when we have the opportunity of meeting in July.

Mr. Freeson: Reverting to the original Question and answer, will the hon. Gentleman tell us whether there will be a reduction in the number of meetings of this very important and helpful Committee?

Mr. Channon: The timing and agenda of further meetings will be discussed in July. The intention at the moment is that meetings should be called to discuss specific topics. For example, on the next occasion the Committee will discuss the report of the Francis Committee.

Mr. Freeson: Will there be a reduction in the number of meetings?

Mr. Channon: As I said, the timing and agenda is to be settled in July.

House Improvements (Loans)

Mrs. Fenner: asked the Secretary of State for the Environment what agencies, other than local authorities and building societies, are currently making loans available to householders unable to meet the non-grant element of house improvement costs, and what steps he will take further to encourage such agencies.

Mr. Channon: I understand that the National Federation of Building Trade Employers are considering arrangements


which they will be publicising shortly which will enable builders undertaking improvement work to offer loans to their customers. I consider this a most useful idea and shall be glad to give it all possible encouragement.

Mrs. Fenner: I thank my hon. Friend for that reply. Does he plan to take any other steps to encourage such agencies? I am sure that he is aware that the non-grant element and the payment of it can act as a definite deterrent to people wishing to improve their property.

Mr. Channon: Yes, I entirely agree. But there is an increasing number of local authorities and building societies who will lend the other half of the grant to the person doing the improvement, and I hope that as many local authorities as possible will do so.

Mr. Freeson: One of the most important elements in improvements is heating. Would the hon. Gentleman agree that it is worth having discussions with his hon. Friends in the Department of Trade and Industry with a view to the fuel industries being encouraged more extensively to provide capital for this element in improvement schemes?

Mr. Channon: I will consider what the hon. Gentleman said. I have been struck, in the large number of improvement grant campaigns which I have attended, by the very close interest which the fuel industries have taken in this scheme and the way in which they have done their utmost to try to further the cause of house improvement.

Housing Aid Centres

Mr. Tebbit: asked the Secretary of State for the Environment what response he has received following his communication with selected housing authorities encouraging the formation of housing aid centres; and if he will make a statement.

Mr. Channon: Ten local authorities have already set up housing aid centres and I understand that a further 14 have firmly decided to do so.

Mr. Tebbit: Is my hon. Friend aware how much help these centres give? Will he give every encouragement to local authorities to go on with this project?

I know how much he is doing, but could he do even more? I am sure that most of us with urban constituencies find that it seems to take an unnecessarily long time before those with the housing problem meet those with the housing solution, and these centres will help greatly in that.

Mr. Channon: I entirely agree. My right hon. Friend is writing to a number of local authorities, asking them to help in this matter. The replies have been very encouraging, and a number of centres run by voluntary associations have done remarkably good work.

Mr. Pavitt: Has the hon. Gentleman received any apology from the London Borough of Brent for not turning up for the discussion which his hon. Friend was to have? Has it given any reason for turning down this idea? Would he do his best to make it change its mind?

Mr. Channon: I believe that the idea of a housing aid centre is suitable for many boroughs, but each borough must decide for itself, and Brent has decided that at the moment it does not want to pursue this idea.

Housing Cost Yardstick

Mr. Geoffrey Finsberg: asked the Secretary of State for the Environment what is the average level of increases recently announced in the housing cost yardstick; what arrangements have been made in respect of special allowances for old people's accommodation; and if he will make a statement.

Mr. Channon: The yardstick increases range from about 7 per cent. to about 12 per cent. according to the nature and location of the scheme. The largest increases are for low density and for old people's schemes. The allowances for the latter have been raised by £50 per dwelling.

Mr. Finsberg: Is my hon. Friend aware that there is some disquiet at the length of time that it took to update the yardstick, and also that the amount, particularly in Inner London, may not be as high as it should be?

Mr. Channon: I will certainly look at the figures for Inner London. If my hon. Friend has any evidence on that matter, I will be delighted to examine it. As


to the length of time, my right hon. Friend has determined to make sure that the yardstick remains realistic. I believe that the new yardstick figures will prove to be realistic.

Mr. Frank Allaun: Since it is vital to maintain the best standard and design for council housing, will the hon. Gentleman consider varying the yardstick annually, rather than waiting, as at present, for five years before renewing it?

Mr. Channon: The hon. Gentleman is quite wrong. The yardstick has been changed several times. It was changed last year, I think on 1st April, and it was changed again this year. There has has been an annual review. The purpose is to keep this up to date and realistic—that is the important point.

Local Authority Mortgages

Mr. Lane: asked the Secretary of State for the Environment what assessment his Department has now made of the response by housing authorities to the removal by the Government of the restriction on local authority mortgage lending and if he will make a statement.

Mr. Channon: The change has been generally welcomed, especially as a means of facilitating the purchase of older houses for improvement. I see no reason to alter the earlier forecast of a substantial increase in local authority mortgage lending this year.

Mr. Lane: Is my hon. Friend aware that there has been a wide welcome for the further steps to encourage would-be home owners which were announced in the debate last week? Can he confirm that a continuing increase in home ownership generally remains one of the Government's top priorities, and that he will keep the Government's full weight behind the efforts of local authorities?

Mr. Channon: Certainly, and my right hon. Friend has made this clear a number of times. The point which my hon. Friend raises about local authority mortgage lending will, I believe, be an extremely important step towards this end.

The Grange, Neasden

Mr. Pavitt: asked the Secretary of State for the Environment when the talks

between the London Borough of Brent and his Department will take place concerning the future of the Grange at Neasden.

Mr. Michael Heseltine: Such talks would be primarily between the London Borough of Brent and the Greater London Council but my Department will attend any meeting they may convene.

Mr. Pavitt: Is the hon. Gentleman aware that there is a good deal of disquiet locally because, after three years of uncertainty, they are delighted that the Department has stepped in to save these historic buildings, but this is a key part of the redevelopment of the Neasden area, due to the bypass scheme? Will he do all he can to see that a decision is reached quickly, either between him and the local borough or between the three tripartite councils and his Department?

Mr. Heseltine: Certainly. We appreciate the urgency of this scheme and have refused to make amendments to it at this late stage, so that it can go ahead as quickly as possible.

Mr. Michael Foot: Can the Minister tell me—

Mr. Speaker: Order. The hon. Gentleman must allow me to call him. Mr. Foot.

Mr. Foot: Who lives at this historic building in Neasden? Is it Lord Gnome?

Mr. Heseltine: I think that the priority which the House would give is that of the house itself. It is a listed building which we seek to preserve.

A18, Edenthorpe (Pelican Crossing)

Mr. Kelley: asked the Secretary of State for the Environment what steps he intends to take to establish the pelican crossing on the A18 at Edenthorpe, which has been promised for more than 12 months.

The Under-Secretary of State for the Environment (Mr. Eldon Griffiths): An order was placed in April. Delivery is expected in July, with installation in August.

Mr. Kelley: Is the hon. Gentleman aware that this is hardly satisfactory?


This pelican crossing was proposed by his Department, in conflict with the opinion of the local people, the parish council and the rural district council, and we are now reaching a peak of heavy summer traffic to the coast in Yorkshire. Something should have been done before now to establish this crossing, before there is any further loss of limb and life?

Mr. Griffiths: The hon. Gentleman might have pressed that point on my predecessor. An order was placed in April, delivery is expected in July and the installation in August.

Oral Answers to Questions — HOUSE OF COMMONS

Members (Tickets to the Public Gallery)

Mr. Tam Dalyell: asked the Lord President of the Council if he will move to appoint a Select Committee to study the methods of allocating to Members visitors tickets in the Public Gallery.

The Lord President of the Council and Leader of the House of Commons (Mr. William Whitelaw): The Services Committee would, I think, be the appropriate Select Committee to consider this. If there is a general wish amongst Members that the present system of allocation should be reviewed, I will certainly ask the Committee to do so.

Mr. Dalyell: In view of the present system whereby two tickets are sent to us every so often, and we may be on a parliamentary delegation to Timbuktu at the time—[Interruption.] I was giving a charitable reason for pocketing the tickets. Many are pocketed, and it is a little hard on those people who travel from far and wide and want to hear our debates but who are kept waiting outside, often when there are vacant seats in the Gallery.

Mr. Whitelaw: Wherever hon. Members may go on delegations, it is true that sometimes the Gallery is not absolutely full at Question time. The difficulty arises from the fact that some Members take their automatic allocation of Strangers Gallery admission orders but neither use them nor return them to the Admission Order Office for reallocation to other Members. Perhaps I might take this opportunity to remind hon. Members

that it would be most helpful if they would return unwanted admission orders as soon as possible to the Admission Order Office.

Dame Irene Ward: Will my right hon. Friend tell the hon. Member for West Lothian (Mr. Dalyell) that the Admission Order Office does everything it possibly can, and that I should be glad if he would stay in Timbuktu?

Mr. Whitelaw: I must point out to my hon. Friend that the hon. Gentleman has not gone there yet; nor would I in any way wish to discuss or argue with her the relative merits of what he ought to do if he goes there.
I entirely agree that the Admission Order Office does everything it can to help. All I am saying is that it would be able to help still more if hon. Members would return unwanted orders.

Table Tennis

Mr. Leonard: asked the Lord President of the Council if he will arrange for facilities in the House of Commons for Members to play table tennis.

Mr. Whitelaw: I have noted the hon. Member's topical suggestion, but I am afraid that there is no space available at the moment.

Mr Leonard: Will the right hon. Gentleman reconsider his answer, particularly bearing in mind that, unlike certain other suggestions for sporting and recreational activities in the House, a table tennis room could be provided with no structural alteration to the building and at absolutely minimum expense? This is a game which could be played, no doubt at widely varying standards, by most hon. Members. Will he also bear in mind that that facility would greatly help in entertaining parliamentary delegations, not perhaps from Timbuktu but from countries further east?

Mr. Whiitelaw: The problem is that there is a strong demand for any accommodation in the House of Commons area. I should point out that the Houses of Parliament Sports and Social Club, which is run for the benefit of the staff employed in the Palace of Westminster, has a table in its premises which it will be pleased to make available to hon. Members after


7 p.m. The club's premises are situated, perhaps appropriately enough, on the ground floor of the Lord Chancellor's residence.

Mr. Strauss: In view of a recent international incident, will the right hon. Gentleman bear in mind the beneficent results sometimes of ping-pong?

Mr. Whitelaw: Certainly. I note what the hon. Gentleman says.

House of Lords (Daily Allowance)

Mr. William Hamilton: asked the Lord President of the Council whether in view of the increased work load now imposed on the House of Lords, he will move for an increase in the daily allowance.

Mr. Whitelaw: No, Sir. It is not my direct responsibility.

Mr. Hamilton: Does the right hon. Gentleman recognise that I am now the self-appointed, unpaid, shop steward especially for the Labour Peers who are doing such a maginificent job of ensuring the full debate of the Industrial Relations Bill which this House was prevented from having? Will he show some compassion for this work in the public interest which is taking place along the other end of the corridor? Will he further tell us whether the pay of the Lords will come within the terms of reference of the Boyle Committee?

Mr. Whitelaw: I note that the hon. Gentleman has ascribed to himself a particular role. I always understood that shop stewards were well aware of the particular conditions they were discussing and arguing for their members. Perhaps it might help the hon. Member in his new role if I point out that there is no daily allowance for attendance in the House of Lords. It is open to peers to claim reimbursement of expenses which they have actually incurred, up to a maximum of £6.50. This is not remuneration and is unrelated to the work load.

Mr. Kaufman: May I, as a more zealous shop steward for the absurd institution along the way than my hon. Friend, put in a request—[HON. MEMBERS: "Order. Withdraw."] I withdraw the word "absurd" and substitute "antiquated and ridiculous". As a shop steward for that, may I suggest that

an hourly allowance be instituted, thus preventing the possibility of the fastest clocking in and clocking out in British industry?

Mr. Whitelaw: Not being an expert in these matters, all I can say is that I have heard of very few shop stewards who start their job on the basis of decrying to the maximum the organisation of the people they are supposed to be representing. Therefore, the hon. Gentleman would not be a particularly satisfactory shop steward.

Select Committee on Taxation

Dr. Gilbert: asked the Lord President of the Council whether he will now move to appoint a Select Committee on taxation.

Mr. Whitelaw: I have no proposals to do so at the present time. Hon. Members will have noted, however, that we move to appoint a Select Committee on Corporation Tax.

Dr. Gilbert: Does the right hon. Gentleman accept that there is support on both sides of the House for a proper Select Committee on Taxation and that the Select Committee on Corporation Tax only is a rather puny creature? Will he tell us what is so special about corporation tax that that alone can be studied while other taxes cannot? May we have an assurance that if the new Select Committee works, without scaring the pants off the Treasury too much, for a period of, say, six months, its remit can be widened?

Mr. Whitelaw: I have always made my position clear. I believe that it is right steadily to develop the Select Committee system. We have set up the Select Committee on Expenditure, which I am sure will succeed, but it is right to give it an opportunity to develop and to see how far it succeeds. We have also set up this ad hoc Committee on Corporation Tax. Again, I should like to see how that succeeds. I think, therefore, that it is right to reserve the position on further developments until we see how those Committees, which we now have, succeed in their particular tasks.

Refreshment Department

Mr. Lipton: asked the Lord President of the Council what arrangements


have been made for the future management of the Refreshment Department.

Dr. Bennett: I have been asked to reply.
I am glad to be able to tell the House that the Catering Sub-Committee have appointed as the new manager of the Refreshment Department Mr. Smillie, at the same rate of salary as his predecessor. Mr. Smillie has served the Refreshment Department for the last four years as personnel manager and for the last few weeks has acted as manager and he has proved himself to be highly efficient in both capacities.

Mr. Lipton: Will the hon. Gentleman be just a little more forthcoming? Has any contract been entered into with Versa-Serve Ltd., a subsidiary of J. Lyons & Company Limited? Will he also explain why applicants for the post of Refreshment Department manager were interviewed at the Strand Palace Hotel? Was this consistent with the dignity of this House?

Dr. Bennett: The Versa-Serve Ltd. contract has not yet been drawn up. We have been rather preoccupied in getting a manager. We are receiving great help from Versa-Serve Ltd. I hope that the help that it is giving will enable the Department to function more efficiently. As for the interviewing of candidates, Versa-Serve Ltd. advertised, in the first instance, on our behalf and sent an adequate short list of candidates to the subcommittee which did the choosing.

Mr. Raphael Tuck: Will the hon. Gentleman turn his attention to the conditions and the food in the Members' cafeteria downstairs where the meat and fish and watery vegetables which we have to consume are a disgrace?

Dr. Bennett: I am only too well aware of the shortcomings in the cafeteria department. Some of the recommendations which we have had and have passed for putting into operation apply to that department. I hope that the service will improve.

Oral Answers to Questions — PORNOGRAPHIC LEAFLETS (PROSECUTION)

Mr. Roy Hughes: asked the Attorney-General if he will ask the Director of Public Prosecutions to reconsider

his decision not to prosecute the Julian Press for sending unsolicited pornographic leaflets through the post to residents in the county borough of Newport, Monmouthshire, and other areas.

The Attorney-General (Sir Peter Rawlinson): The Director of Public Prosecutions earlier formed the opinion, with which I agree, that under the existing law prosecution in respect of the circulation of these leaflets would not succeed. The Unsolicited Goods and Services Bill will come into force three months after the day on which it is passed, and I will then ask the Director to to reconsider the position.

Mr. Hughes: I am grateful to the Attorney-General for that information. Will he appreciate that this sending of unsolicited pornographic literature through the post is certainly causing a good deal of embarrassment to many families in my constituency? Would he not agree that action is needed?

The Attorney-General: I appreciate the present situation, but I know that the House will accept that I should not say anything further because I have undertaken to ask the Director to look at this matter again when the new legislation becomes law.

Dame Irene Ward: It would be very acceptable to most people in the country if the law were altered. Is it too much to ask that, when the country as a whole is demanding action, we might perhaps take it?

The Attorney-General: As my hon. Friend will appreciate, the initiation of legislation is not a matter for me, but doubtless what she has said will be noted by my right hon. and hon. Friends.

Sir Elwyn Jones: Is it not true that the law has now been altered, as the right hon. and learned Gentleman said, and that the problem facing potential prosecutions has been much eased?

The Attorney-General: The law will be altered when the Royal Assent is given to that piece of legislation, and then, three months later, it will come into effect. What the exact consequences will be of that Clause in that Bill on these particular leaflets I am not prepared to say.

Sir H. Harrison: Is my right hon. and learned Friend aware that it is not only


in Wales that recipients live? This is widespread in the Eastern Counties. I am delighted to hear that, within a few months, these people will be prosecuted.

The Attorney-General: I appreciate that the sending of these leaflets is not limited to any part of the country. My hon. Friend will appreciate that I can go no further than to say that this matter will be reconsidered when the law is changed.

Oral Answers to Questions — HOME DEPARTMENT

Pornographic Literature

Mr. Roy Hughes: asked the Secretary of State for the Home Department if he will request the Younger Committee to expedite the preparation of its report on privacy in view of public concern about unsolicited pornographic literature being sent through the post.

The Under-Secretary of State for the Home Department (Mr. Mark Carlisle): No, Sir. As stated in reply to a Question by my hon. Friend the Member for Ilford, North (Mr. Iremonger) on 29th October—[Vol. 805, c. 170]—the Committee hopes to be able to report by the end of this year.

Mr. Hughes: I thank the hon. and learned Gentleman for that Answer. I understand that this report will also deal with the question of pornographic literature being sent through the post, and that is why I asked for it to be expedited. Does the hon. Gentleman agree, as I asked his right hon. and learned Friend in connection with the last Question, that urgent action requires to be taken in this matter?

Mr. Carlisle: The hon. Gentleman is right. The terms of reference of the Younger Committee on privacy certainly cover the question of unsolicited literature being sent through the post. It is felt, however, that it would be wrong to ask the Committee to make an interim report because it is hoped that it will be reporting by the end of the year.

Mr. Fry: Is my hon. and learned Friend aware that one way to deter people from sending these unfortunate and distasteful missives through the post would be for the recipients to return the envelopes unstamped with nothing inside

them, so forcing these people, at considerable expense, to receive nothing?

Mr. Carlisle: That is a matter which I must leave to individuals. I cannot comment on the success or otherwise of such a project.

Sir Elwyn Jones: Is it not a fact that there was recently a successful prosecution in the Old Bailey in respect of unsolicited pornographic literature? Is it not the case, therefore, that there are still some weapons in the armoury of the law in regard to this matter?

Mr. Carlisle: That is so. As the right hon. and learned Gentleman says, a successful prosecution was brought. It was brought under the Post Office Act, 1953. The sending of anything indecent through the post is covered by that Act. The successful prosecution was against the advertisement of the book "A History of the Mouth and Oral Sex", which shows that the law has some teeth in this matter.

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

Brunei

Mr. Bryant Godman Irvine: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about the recent negotiations with the Sultan of Brunei.

The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Anthony Royle): Talks were held from 19th April to 5th May between His Highness The Sultan and my right hon. Friend the Secretary of State and myself. An agreement to amend the 1959 Agreement was initialled by The Sultan and by my right hon. Friend. The amending Agreement is to be signed and published later in the year. Arrangements for the continued stationing of a battalion of the British Brigade of Gurkhas in Brunei were also agreed.

Mr. Godman Irvine: Will my hon. Friend ensure that the Sultan of Brunei and the people of that country are aware of the friendship and appreciation expressed not only by this House but by the people of this country for this continued example of understanding and friendship between our two peoples?

Mr. Royle: I very much welcome my hon. Friend's comments. The outcome of the talks is satisfactory for both sides and underlines the close and continuing friendship between Britain and Brunei over the last 100 years.

Mr. Hattersley: My supplementary question is, I fear, in four parts, though the parts are all related. First, does the hon. Gentleman recall that previous agreements have been open-ended? Is this one open ended or is there a termination point?
Second, does he also recall that when my right hon. Friend the Member for Middlesbrough, East (Mr. Bottomley) announced a similar agreement to the House six years ago, there was talk about there being an obligation on the Sultan to make progress towards genuinely democratic rule? This does not appear in the new agreement.
Third, since Her Majesty's Government are committed by this agreement to the stationing of one battalion of Gurkhas in Brunei, may we have an assurance that a new Gurkha agreement has now been written and agreed with the Government of Nepal, rather than the matter having been announced before the Government of Nepal have given their agreement?
Fourth, to avoid the pursuit of these detailed points, will a copy of the agreement be placed in the Library of the House, as happened on previous occasions?

Mr. Royle: As I indicated in my original reply, the details of the amending agreement will remain confidential until their publication later in the year. I hope to go to Brunei in October to sign the agreement. When it is signed we will put a copy in the Library so that the hon. Gentleman can have answers to all his questions. [Interruption.] I was about to go on to give further answers.
I was asked whether it was an open-ended agreement. This agreement is an amendment to the 1959 agreement. It is,

therefore, basically still the 1959 agreement, as amended.
The answer to his question about the Gurkhas is that there has been an exchange of letters between my right hon. Friend the Secretary of State and the Sultan about the Gurkha battalion, and the Gurkha battalion will continue to be entirely under British control and command.

Mr. Hattersley: I am sorry to have to pursue the hon. Gentleman over this, but one of my questions he did not answer at all and another he answered totally inadequately.
I have no doubt that the Sultan of Brunei is happy to have a Gurkha battalion stationed in Brunei. Is the King of Nepal also happy about it?
The hon. Gentleman did not answer my question about progress towards a genuinely democratic structure in Brunei, which my hon. Friends regard as essential in terms of writing a new agreement, but about which the hon. Gentleman said nothing.

Mr. Royle: The Nepalese Government are aware of, and accept, our plans. The answer to his second question is that any movement regarding internal affairs in Brunei must remain a matter for the Sultan.

Mr. Dalyell: Can we get this clear? Has the clause about social progress in Brunei, which was an important part of the agreement signed by my right hon. Friend the Member for Middlesbrough, East (Mr. Bottomley), been completely obliterated? Is that the fact of the situation?

Mr. Royle: I do not think I have given any indication that anything has been obliterated. [HON. MEMBERS: "Answer."] I have only said—and I hope that the hon. Gentleman will accept this—that an amending agreement to the 1959 agreement has been initialled. The final agreement will be signed later this year, and that will be published and placed in the Library.

Oral Answers to Questions — ROYAL ASSENT

Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act, 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Animals Act, 1971.
2. Courts Act, 1971.
3. Coinage Act, 1971.
4. Administration of Estates Act, 1971.
5. Betting, Gaming and Lotteries (Amendment) Act, 1971.
6. Powers of Attorney Act, 1971.
7. Rent (Scotland) Act, 1971.
8. National Savings Bank Act, 1971.
9. Unsolicited Goods and Services Act, 1971.
10. Interest on Damages (Scotland) Act, 1971.
11. Attachment of Earnings Act, 1971.
12. Plymouth Corporation Act, 1971.
13. Co-operative Bank Act, 1971.
14. National Westminster Bank (North Central Finance &amp; Lombard Banking) Act, 1971.
15. Australian, Mercantile, Land and Finance Company, Limited Act, 1971.
16. John Hollis Trust for Employees (Amendment) Act, 1971.
17. New Broken Hill Consolidated Limited Act 1971.

NORTHERN IRELAND BILL OF RIGHTS

3.36 p.m.

Mr. Arthur Latham: I beg to move,
That leave be given to bring in a Bill to amend the powers of the Parliament and Government of Northern Ireland and to make other provisions for equating the civil rights of citizens of Northern Ireland with those of other citizens of the United Kingdom.
I fear that there are suspicions that a Conservative Whip is to be applied against this proposition. [HON. MEMBERS: "Shame."] If so, that is a matter for regret, and I hope that hon. Gentlemen opposite will listen to the case that I shall present and decide, in the light of that case, whether or not to oppose my Bill. They will find that the language I use and the approach I make is moderate and that my proposals are quite modest.
I emphasise at the outset that this is not a Bill to introduce direct rule by Westminster. Nor is it a Bill to abolish Stormont. Indeed, in some ways it might strengthen it. It is also not a Bill to end partition. I am aware of the complexities of the Irish situation, but complexities can sometimes obscure certain simple principles which might otherwise be generally accepted.
As far as I know, I have no Irish ancestry. I believe, however, that I speak for the majority of United Kingdom citizens who see British lives lost and at risk, and British taxpayers' money expended, in Northern Ireland to maintain what in one set of language is called law and order and in another is said to uphold the authority of a Government who have fallen far behind the times.
Several thousand British troops are involved in Northern Ireland. Many millions of £s of British taxpayers' money is also involved. The rest of the citizens of the United Kingdom, the ordinary people of England, Scotland and Wales, may be forgiven for asking, "Why have we the responsibility while they, the Stormont Government, have the authority?". Responsibility without authority is always bad.
I do not propose to enter the discussion of the historic, present-day or future arguments concerning a unified Ireland,


although my Bill would give Irishmen the right to advocate a unified Ireland, in the same way as Common Marketeers in the rest of the United Kingdom can advocate the giving up of British sovereignty to go into the E.E.C.
As Captain Terence O'Neill, as he then was, said after resigning as Prime Minister, in civil rights Northern Ireland is at least a hundred years behind the rest of the United Kingdom. I want to see the British Parliament pulling Northern Ireland, if not into the 1970s, somewhere towards them.
As we know, certain reforms have been proposed, and even legislated for, by Stormont but they are not being implemented. My Bill would be intended not to take away Stormont's powers but to re-examine the devolution of powers under the Government of Ireland Act, 1920, with a view to recasting or reallocating those powers.
It is common to most domestic Acts of the British Parliament that there is a Clause which expressly precludes their application to Northern Ireland. Yet, as was pointed out in the House the other day, hon. Members from Northern Ireland have the right to speak and vote on those matters, and, indeed, they do. One measure, in particular, which applies to the rest of the United Kingdom and which I want to extend to Northern Ireland is the Race Relations Act, 1968.
One aspect of the preliminary draft of the Bill—some hon. Members may have seen it as a result of the lobby last week—which might be contentious but which could on Second Reading or in Committee be considered for deletion—although I should want to defend it— is the proposal to reintroduce a measure of proportional representation. I put it to some of my hon. Friends who might hesitate on this point that we must accept that there is no ideal electoral system to suit all situations, all places and all times, irrespective of circumstances and historical background. The two-party system works here and in some other countries. In some situations, the one-party system might be more democratic and effective. In some places, the multiparty system has failed, and in others it has worked well.
But what the House should realise when considering the possible cones-

quences of the reintroduction of a measure of proportional representation is that in Northern Ireland, although in theory there may be the opportunity for a two-party system, in practice there has been a one-party system for the past 50 years. I suggest to the House, therefore, that P.R. may be a means for achieving a more representative Parliament for Northern Ireland and ensuring that the minority is adequately represented, and I submit that that would give Stormont greater credibility and more right to have its authority accepted.
I do not believe that it is possible to sort out in days, weeks or months that which has gone by default for 50 years. Therefore, the Bill which I seek leave to introduce would not be intended as a revolutionary Measure. There was a convention at one time that this House did not discuss Northern Ireland affairs. As is its way, however, the House has responded to events and it has in recent times become customary for matters concerning events in Northern Ireland to be discussed. My submission is that, because of the involvement of the rest of the United Kingdom in the problems of Northern Ireland, the British Parliament should assert a degree of authority for what happens there in the future.
I should want it to be an eminently reasonable Measure. I hope that those who have seen the preliminary draft will recognise that that is the intention and will acknowledge also that, if leave be given this afternoon, it will be open to representations from those interested so that the Bill may in due course be amended to meet their wishes.
I believe that it is desirable that leave should be given and that there should be a Second Reading debate on the civil rights situation in Northern Ireland, with an opportunity thereafter in Committee, I hope, to discuss in some detail what degree of responsibility the British Parliament has, and should have, and how it should assert it. All I am asking for—I emphasise this to hon. Members opposite, if they have a Whip operating in this matter—is support for the eminently reasonable proposition that leave be given to introduce a Bill.
to amend the powers of the Parliament and Government of Northern Ireland and to make other provisions for equating the civil rights of citizens of Northern Ireland with those of other citizens of the United Kingdom".


I am certain that the majority of the British people would agree that this is a laudable objective and would greatly resent, and rightly so, an obdurate refusal to allow it to have full and proper consideration by the House.

3.45 p.m.

Mr. W. F, Deedes: I oppose the Motion, embodying, as it does, what the hon. Member for Paddington, North (Mr. Latham) has described as fairly modest proposals for the Government of Northern Ireland. I oppose it not least because what the hon. Gentleman suggests would be wholly out of line with the declared policy of the parties on both sides of this House, rehearsed and agreed only a month ago in the debate on Northern Ireland. [HON. MEMBERS: "No."] I have afforded myself a full study of the preliminary draft. I am indebted to the Irish Times—I think it was—which provided a pretty full draft under the headline,
Bill seeks PR and Race Act in North Chances of passage at Westminster poor.
That seemed to be the understatement of the year.
Setting aside the merits of the hon. Gentleman's proposals, I think that a scintilla of doubt may enter the minds of some of my hon. Friends and, perhaps, some hon. Members opposite about whether a Ten Minutes Rule Bill is the best vehicle for revising the Constitution of Northern Ireland on this heroic scale.
Searching for the most reasonable and kindly thing I can say about the hon. Gentleman's proposed Bill, I recognise that it is primarily associated with a former Member of this House, then Fenner Brockway, for whom some of us felt enormous affection and respect even though we constantly disagreed with what he wanted to do. To his honour, be it said, Fenner Brockway proposed a measure similar to this in, I think, 10 consecutive years, and then, as though to illustrate the force of an idea whose time has come, the Labour Government introduced his Race Relations Bill in 1965. which was probably the most singular triumph—I acknowledge this, since it is really the noble Lord's Bill which we are now discussing—that any Private

Member's Bill could have had for a very long time.
I remind the hon. Gentleman that although Fenner Brockway's Bill was taken up by the Government, religion was excluded from the 1965 Act, and this not due to pressure from the then Conservative opposition but because we were persuaded by the arguments of the Labour Home Secretary who, after there had been much discussion, made quite clear that religion could not sensibly be included in that Act.
Two points arise in this connection. The Northern Ireland Parliament has passed the Prevention of Incitement to Hatred Act, 1970. I shall not argue now whether it is working well or ill. We have in this country some experience of the difficulty of making these Acts sensibly operative. But the fact remains that it is now an offence orally or in writing to incite hatred against or arouse fear in any section of the public in Northern Ireland on grounds of religious belief, colour, race or ethnic or national origin.
The second point I make is that, if that is felt by the hon. Gentleman and his friends to be inadequate, and if he wishes the Westminster Act to be binding on Northern Ireland in this regard, discrimination on grounds of religion would have to be applied here. But that is something which Parliament has already rejected, on the advice of the then Labour Home Secretary, and it would run contrary to the declared policy of successive Governments.
I come now to the proposal for proportional representation to which the hon. Gentleman referred. I found him less than convincing on this aspect of the matter. In fact, this is the alternative transferable vote for multi-member constituencies. That system operated for Stormont elections before 1929. If we look at the figures before and after that date, we find surprisingly little difference in the overall balance of representation. I have the figures here.
Another Clause which the hon. Gentleman would include in what he calls his modest measure would list a dozen spheres in which the Parliament of Northern Ireland would cease to have


power to legislate. Some are highly suggestive. Few of the provisions which it is proposed should cease are, in fact, in use. The most suggestive is, I think, the proposed Clause 5(e), regarding the punishment of prisoners by flogging. The Stormont civil servants are unable to cite a single case of the flogging of a prisoner as a punishment. I accept that the power of search without warrant is still being exercised. Arrest without warrant, imprisonment without trial—these powers exist, but are not being used. [Interruption.] Detention without trial is not being used.
As to stopping up of highways, the former Home Secretary, the right hon. Member for Cardiff, South-East (Mr. Callaghan) observed very fairly only a month or two ago in Northern Ireland:
…the Ulster Government were ready and prepared to get rid of the Act. This was destroyed by the activities of those who introduced violence into this country shortly after they had taken this decision.
That is a very fair comment on that aspect.
Nobody denies that the emergency has required the Government of Northern Ireland to exercise powers which they dislike as much as we here dislike them. That should be said in fairness to them. Responsibility for the emergency does not rest entirely on the Government of Northern Ireland.
The Bill also contains proposals which would afford freedom for the individual to argue and work for unification with the Republic, to display flags and so on. If the hon. Gentleman believes that that is the road to pacification, he has not read the history of Ireland. In effect, what he and his hon. Friends are seeking is the unilateral disarmament in a political sense of the Northern Irish Province. There may be a case for unification, though it is not one that I would argue. There may be a case for direct rule from Westminster, though that is one that is at present rejected by both sides of the House. But there can be no case for directing from Westminster a policy which would coerce Northern Ireland into unification. It is that underlying sense in the hon. Gentleman's proposals that causes me some anxiety. That is not a policy of pacification; it is a policy which

would exacerbate and perpetuate internecine strife.
This propaganda exercise—it is fair to describe it as such—is founded on a series of propositions which discounts unfairly the progress Northern Ireland has made towards some of the reforms undertaken quite recently. It is irresponsible and less than honest to dismiss this progress as being of no account, and, to be fair, hon. Members know that that is so.
The new Housing Executive has been set up. The 1969 legislation has given full franchise on the basis of one man, one vote in local government elections, and votes at 18. All councils have made a declaration of equality of employment opportunity, and the majority have submitted their codes to the Government. The Parliamentary Commissioner has been at work, and has already looked into about 33 cases, of which only two showed maladministration and none showed discrimination. The Commissioner for Complaints, dealing with local government, has investigated 285 cases. Fourteen showed maladministration and none discrimination. There are 450 cases under investigation. We need not exaggerate this progress, but we should acknowledge it. In sum, the Northern Ireland Government have made far-reaching changes, and have shown an earnest intention to see their programme through.
The fact is that we have delegated certain responsibilities to them. The hon. Gentleman's proposals would interfere with the discharge of those responsibilities to a point which would totally undermine the credibility and the authority of the Government of Northern Ireland. The object is not to liberate. It is to annihilate the existing Constitution under the Government of Ireland Act, 1920.
I am not clear in my mind whether the hon. Gentleman's proposal is well-intentioned or simply mischievous. Either way, its consequences would be disastrous. That is why my right hon. and hon. Friends should reject the hon. Gentleman's Motion.

Question put, pursuant to Standing Order No. 13 (Motions for leave to bring

in Bills and nomination of Select Committees at commencement of Public Business):—

The House divided: Ayes 135, Noes 175.

Division No. 361.]
AYES
[3.55 p.m.


Allaun, Frank (Salford, E.)
Garrett, W. E.
Murray, Ronald King


Ashton, Joe
Gilbert, Dr. John
Oram, Bert


Atkinson, Norman
Ginsburg, David
Orbach, Maurice


Bagier, Gordon A. T.
Golding, John
Orme, Stanley


Barnett, Joel
Gourlay, Harry
Oswald, Thomas


Beaney, Alan
Grant, George (Morpeth)
Palmer, Arthur


Benn, Rt. Hn. Anthony Wedgwood
Griffiths, Will (Exchange)
Pardoe, John


Bennett, James(Glasgow, Bridgeton)
Hamilton, James (Bothwell)
Pavitt, Laurie


Bidwell, Sydney
Hamling, William
Pendry, Tom


Blenkinsop, Arthur
Hannan, William (G'gow, Maryhill)
Pentland, Norman


Booth, Albert
Hattersley, Roy
Perry, Ernest G.


Bradley, Tom
Hughes, Mark (Durham)
Rankin, John


Brown, Hugh D. (G'gow, Provan)
Hughes, Robert (Aberdeen, N.)
Reed, D. (Sedgefield)


Buchan, Norman
Hughes, Roy (Newport)
Robert, Rt. Hn. Goronwy (Caernarvon)


Buchanan, Richard (G'gow, Sp'burn)
Hunter, Adam
Roper, John


Butler, Mrs. Joyce (Wood Green)
Jay, Rt. Hn. Douglas
Ross, Rt. Hn. William (Kilmarnock)


Campbell, I. (Dunbartonshire, W.)
Jenkins, Hugh (Putney)
Sheldon, Robert (Ashton-under-Lyne)


Carmichael, Neil
John, Brynmor
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)


Castle, Rt. Hn. Barbara
Johnson, Carol (Lewisham, S.)
Silkin, Hn. S. C. (Dulwich)


Clark, David (Colne Valley)
Johnson, James (K'ston-on-Hull, W.)
Sillars, James


Cocks, Michael (Bristol, S.)
Johnson, Walter (Derby, S.)
Silverman, Julius


Cohen, Stanley
Jones, Dan (Burnley)
Small, William


Concannon, J. D.
Jones, Gwynoro (Carmarthen)
Spearing, Nigel


Conlan, Bernard
Jones, T. Alec (Rhondda, W.)
Spriggs, Leslie


Crawshaw, Richard
Kerr, Russell
Stoddart, David (Swindon)


Cronin, John
Kinnock, Neil
Strang, Gavin


Dalyell, Tam
Lamond, James
Strauss, Rt. Hn. G. R.


Davidson, Arthur
Latham, Arthur
Summerskill, Hn. Dr. Shirley


Davis, Clinton (Hackney, C.)
Lee, Rt. Hn. Frederick
Swain, Thomas


Deakins, Eric
Leonard, Dick
Thorpe, Rt. Hn. Jeremy


de Freitas, Rt. Hn. Sir Geoffrey
Lestor, Miss Joan
Tinn, James


Delargy, H. J.
Lever, Rt. Hn. Harold
Torney, Tom


Deil, Rt. Hn. Edmund
Lipton, Marcus
Tuck, Raphael


Devlin, Miss Bernadette
Lomas, Kenneth
Urwin, T. W.


Douglas, Dick (Stirlingshire, E.)
Lyons, Edward (Bradford, E.)
Varley, Eric G.


Douglas-Mann, Bruce
McBride, Neil
Wainwright, Edwin


Edwards, William (Merioneth)
McCartney, Hugh
Walden, Brian (B'm'ham, Alf Saints)


Ellis, Tom
McElhone, Frank
Watkins, David


English, Michael
McGuire, Michael
Weitzman, David


Evans, Fred
Mackie, John
Willey, Rt. Hn. Frederick


Fisher, Mrs. Doris(B'ham,Ladywood)
McNamara, J. Kevin
Williams, Alan (Swansea, W.)


Fitch, Alan (Wigan)
Mellish, Rt. Hn. Robert
Woof, Robert


Fletcher, Raymond (Ilkeston)
Mendelson, John



Fletcher, Ted (Darlington)
Milne, Edward (Blyth)
TELLERS FOR THE AYES:


Foley, Maurice
Morris, Charles R. (Openshaw)
Mr. A. W. Stallard and


Foot, Michael
Mulley, Rt. Hn. Frederick
Mr. Gerald Kaufman.


Freeson, Reginald






NOES


Adley, Robert
Chataway, Rt. Hn. Christopher
Glyn, Dr. Alan


Atkins, Humphrey
Churchill, W. S.
Goodhew, Victor


Baker, Kenneth (St. Marylebone)
Cockeram, Eric
Gorst, John


Baker, W. H. K. (Banff)
Coombs, Derek
Gower, Raymond


Balniel, Lord
Cordle, John
Grant, Anthony (Harrow, C.)


Beamish, Col. Sir Tufton
Cormack, Patrick
Gray, Hamish


Bell, Ronald
Crouch, David
Griffiths, Eldon (Bury St. Edmunds)


Benyon, W.
d'Avigdor-Goldsmid, Sir Henry
Gummer, Selwyn


Berry, Hn. Anthony
Deedes, Rt. Hn. W. F.
Gurden, Harold


Biffen, John
Dixon, Piers
Hall, John (Wycombe)


Biggs-Davison, John
Drayson, G. B.
Hamilton, Michael (Salisbury)


Blaker, Peter
Elliot, Capt. Walter (Carshalton)
Harrison, Col. Sir Harwood (Eye)


Boardman, Tom (Leicester, S.W.)
Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Haselhurst, Alan


Body, Richard
Eyre, Reginald
Hawkins, Paul


Boscawen, Robert
Farr, John
Heseltine, Michael


Bossom, Sir Clive
Fell, Anthony
Hicks, Robert


Bowden, Andrew
Fenner, Mrs. Peggy
Higgins, Terence L.


Bray, Ronald
Fidler, Michael
Hiley, Joseph


Brinton, Sir Tatton
Finsberg, Geoffrey (Hampstead)
Hill, James (Southampton, Test)


Brocklebank-Fowler, Christopher
Fletcher-Cooke, Charles
Holt, Miss Mary


Brown, Sir Edward (Bath)
Fookes, Miss Janet
Hornsby-Smith, Rt. Hn. Dame Patricia


Bruce-Gardyne, J.
Foster, Sir John
Howell, David (Guildford)


Bullus, Sir Eric
Fox, Marcus
Howell, Ralph (Norfolk, N.)


Carlisle, Mark
Fry, Peter
Hutchison, Michael Clark


Channon, Paul
Gibson-Watt, David
Irvine, Bryant Godman (Rye)


Chapman, Sydney
Gilmour, Sir John (Fife, E.)
James, David




Jenkin, Patrick (Woodford)
Montgomery, Fergus
Stoddart-Scott, Col. Sir M.


Jennings, J. C. (Burton)
More, Jasper
Stokes, John


Jessel, Toby
Morgan-Giles, Rear-Adm.
Stuttaford, Dr. Tom


Kellett, Mrs. Elaine
Morrison, Charles (Devizes)
Taylor, Sir Charles (Eastbourne)


Kershaw, Anthony
Mudd, David
Taylor, Edward M.(G'gow,Cathcart)


Kilfedder, James
Neave, Airey
Taylor, Robert (Croydon, N.W.)


King, Tom (Bridgwater)
Normanton, Tom
Tebbit, Norman


Legge-Bourke, Sir Harry
Onslow, Cranley
Thomas, John Stradling (Monmouth)


Le Marchant, Spencer
Oppenheim, Mrs. Sally
Thomas, Rt, Hn. Peter (Hendon, S.)


Lewis, Kenneth (Rutland)
Orr, Capt. L. P. S.
Thompson, Sir Richard (Croydon, S.)


Lloyd, Rt. Hn. Geoffrey(Sut'nC'dfield)
Owen, Idris (Stockport, N.)
Tilney, John


Luce, R, N.
Page, Graham (Crosby)
Trafford, Dr. Anthony


McCrindle, R. A.
Page, John (Harrow, W.)
Trew, Peter


Maclean, Sir Fitzroy
Paisley, Rev. Ian
Tugendhat, Christopher


McMaster, Stanley
Parkinson, Cecil (Enfield, W.)
Turton, Rt. Hn. R. H.


Macmillan, Maurice (Farnham)
Percival, Ian
van Straubenzee, W. R.


McNair-Wilson, Michael
Pounder, Rafton
Waddington, David


McNair-Wilson, Patrick (NewForest)
Powell, Rt. Hn. J. Enoch
Walker-Smith, Rt. Hn. Sir Derek



Price, David (Eastleigh)
Ward, Dame Irene


Magginnis, John E.
Pym, Rt. Hn. Francis
Warren, Kenneth


Marten, Neil
Raison, Timothy
Weatherill, Bernard


Mather, Carol
Redmond, Robert
White, Roger Gravesend)


Maude, Angus
Reed, Laurance (Bolton, E.)
Whitelaw, Rt. Hn. William


Mawby, Ray
Ridsdale, Julian
Wiggin, Jerry


Meyer, Sir Anthony
Russell, Sir Ronald
Wilkinson, John


Mills, Peter (Torrington)
Sharples, Richard
Wolrige-Gordon, Patrick


Mills, Stratton (Belfast, N.)
Shaw, Michael (Sc'b'gh &amp; Whitby)
Woodnutt, Mark


Mitchell, Lt-Col.C.(Aberdeenshire, W)
Simeons, Charles
Worsley, Marcus


Mitchell, David (Basingstoke)
Soref, Harold
Wylie, Rt. Hn. N. R.


Moate, Roger
Speed, Keith
Younger, Hn. George


Molyneaux, James
Spence, John



Money, Ernle
Sproat, Iain
TELLERS FOR THE NOES


Monks, Mrs. Connie
Stanbrook, Ivor
Mr. Robert Cooke and


Monro, Hector
Stewart-Smith, D. G. (Belper)
Mr. John Wells.

Orders of the Day — FINANCE BILL

(Clauses 6, 7, 8, 10, 22, 30 and 49 and any new Clause relating to Purchase Tax)

Considered in Committee [Progress, 11th May].

[Sir ROBERT GRANT FERRIS in the Chair]

Clause 8

CHARGE OF CORPORATION TAX FOR FINANCIAL YEAR 1970

Question proposed, That the Clause stand part of the Bill.

4.5 p.m.

The Chief Secretary to the Treasury (Mr. Maurice Macmillan): This Clause authorises the charging of corporation tax at the rate of 40 per cent. on company profits arising in the 12 months of the financial year starting 1st April, 1970. It is a short Clause of 17 words, which means, if my calculations are right, that it is worth about £29 million a word. I shall be brief in introducing it, since reductions in the previous rate have already been debated at some length last October, in the Budget debate and on the Second Reading of the Finance Bill. I do not think that that will necessarily prevent a reasonably long debate today, but the Government's reasons are well known, so perhaps the Committee would perfer me to make my main argument in reply to the points raised during the debate.
Nevertheless, it will probably be convenient for the Committee if I make a few introductory remarks of a practical nature. In doing so, I will try to avoid anticipating the future work of the Committee on the question of capital allowances, which we shall debate on the Floor of the House on Clause 30 and also upstairs, and the work of the powerful Select Committee which is to consider the Green Paper on corporation tax changes. I am bound to mention these aspects because of their connection with the rate

of tax, but I hope I can do so within the rules of order without anticipating our future debates.
Corporation tax was first introduced at the rate proposed in the Bill—40 per cent. It remained at that rate throughout the financial year 1965–66. In 1967, the rate was raised to 42½ per cent. In the financial year 1968–69, it was 45 per cent. It was to have remained at 45 per cent. for the financial year 1969–70 until my right hon. Friend the Chancellor of the Exchequer last October put the rate back to 42½ per cent.
During that period, we saw a considerable falling off in company profits. Gross trading profits and outturn prices and not just taking account of changes in the value of money, were £4,400 million in 1964 and £4,610 million in 1965, ending up with £5,010 million in 1970. In other words, the percentage of total domestic income which was represented by company profits, excluding stock appreciation, fell steadily from 14·3 per cent. in 1964 to an estimated 10 per cent. in 1970. This in itself is justification for the Government's policy of reducing the rate of corporation tax both last October and in the Budget, and, indeed, it might even commend itself to the Opposition, however much they may equate profits with extortion. It should commend itself to them on the basis that one cannot successfully milk a starving cow. Before we come to the question of company profits, I want to mention the question of the yield from corporation tax as affected by my right hon. Friend's proposals.
The Budget estimate of the yield of corporation tax for 1971–72 is £1,620 million. Not all of this will actually be charged at the 40 per cent. rate. Some of it may relate to earlier years, when the rate was higher. It is estimated that the reduction from 423, to 40 per cent. will reduce the tax receipts by £55 million in 1971–72 and by £105 million in a full year.
I should warn the Committee that this estimate takes account of two significant side effects. The first is that the cost to the Exchequer of what is known as overspill relief will be increased. Overspill relief was introduced by Section 81 of the Finance Act, 1965, for a transitional period to compensate companies


with overseas income for a reduction of double taxation relief due to them as a result of corporation tax being lower than the old combined rate of income tax and profits tax. As provided in the 1965 Act, overspill will be reduced to two-fifths of its original value in 1971–72 and to one-fifth in the final year, 1972–73.
The second side effect is that the reduction of the rate will in principle increase the funds available for distribution, and to the extent that companies do increase their dividends, there will be a corresponding increase in the amount of Schedule F tax, deducted from dividends, reaching the Exchequer. Obviously, this calculation involves some judgment, since in practice many companies will need to retain funds rather than distribute them in order to restore their liquidity position and to finance investment. But in estimating the effect of these changes, these two side effects have been taken into account.
There was a 2½ per cent. reduction last October and a further 2½ per cent. reduction in the Budget, and the two together bring the rate of corporation tax down to 40 per cent. and are estimated to reduce the tax coming into the Exchequer by £150 million in 1971–72 and £200 million in 1972–73. That is a gross figure, not taking account of any other changes in investment grants, allowances and the rest.
If one takes the effects on companies and on the Exchequer together, for the year 1970–71, following the Budget proposals, there is a reduction in the yield of taxation and an increase, therefore, in company liquidity and the money available to companies. Taking account of the change in investment grants and of the new capital allowances of about £60 million, rising to £135 million in 1971–72, dropping to £10 million in 1972–73, rising to £20 million in 1973–74 and dropping again to £10 million in 1974–75, the greatest effect on company liquidity will come increasingly in the years 1970–71 and 1971–72, when, of course, it is likely to be most required.
The purpose of the reduction in corporation tax is obvious. The whole purpose of the Budget was, among other things to help investment by expanding demand and by re-establishing confidence in business and the growth of the economy, and by various other measures,

including the reduction in corporation tax. These measures taken together will improve incentives help the cash flows of companies and restore liquidity.
4.15 p.m.
The reduction in the rate is also needed for the purpose of reforming the structure. I will, however, steer clear of the details of that because they are contained in the Green Paper and will be subjected to detailed examination by the Select Committee. But together they add up to a consistent and integrated policy which will reduce the total weight of tax on companies and redistribute the burden of taxation as between companies in a way which the Government regard as likely to be more equitable and more effective towards encouraging economic growth and investment. The reduction in corporation tax brings it to a level which is consistent with the Government's intention of bringing in a two-rate tax at acceptable rates.

Mr. John Cronin: Why has the reduction been made in two separate slices? What is the difference between the situation now and the situation a few months ago?

Mr. Macmillan: The trend was beginning to be apparent when my right hon. Friend made his original judgment which led to the reduction last October, and it became more established and more obvious. The requirement for greater assistance for company liquidity and profitability was even clearer by the time he came to make his Budget judgment. Therefore, his further measure in the Budget was an extension of the process which he had already started.
The criticism of the Opposition is not that we acted too early but that we should have expanded the economy more. As that criticism was largely directed towards increasing the capacity not only of the economy but of companies to invest, my right hon. Friend's judgment in making the reduction to 40 per cent. is hardly open to criticism by hon. Members opposite. No doubt it will be said that we should do more to encourage investment by companies and to help them invest in new programmes. But I do not think that it can be clearly argued that the present reduction in the rate of corporation tax is too much in current circumstances. Indeed, I hope that the


Committee will accept that it is necessary to help the Government in securing profitable investment in the future. But, as has been made clear, this depends on restoring the confidence of business in the prospect of profitable trading and investment in the United Kingdom. It means that people expect to see relief from taxation so as to be able to retain profits as well as the possibility in the future of earning greater profits. It is this expectation that must govern to a large extent the decisions of companies on their future policy.
There is a second factor. It is not just the expectation of profit but the capacity to invest and the availability of funds for investment that are important, and the reduction in the rate of corporation tax will directly and indirectly help companies, institutions and individuals in restoring a greater capital market and helping future investment. It is in that spirit that I commend the Clause.

Mr. Joel Barnett: I should like to examine briefly the objectives that the Chief Secretary told us lie behind the reasons for cutting corporation tax on this and the previous occasion and to see whether this is the best way of achieving the purposes set out by the Chief Secretary. No one denies that the reduction in corporation tax will clearly improve liquidity. Obviously, if we cut the rate of corporation tax, we improve the amount of resources in the hands of companies. As the Chief Secretary pointed out, in 1971–72 there is a £55 million reduction in corporation tax as a result of this Bill, and altogether, by 1971–72, if we include the mini Budget, the total is £150 million.
We cannot really take that on its own, and say that it is the only thing that affects companies. There are clearly other measures taken by the Government and other things happening which affect company liquidity. This cannot be taken in isolation. There are the increased national insurance costs, the increase in the employers' share of national insurance and graduated pensions, which the Government Actuary reckons in 1971–72 will cost employers £85 million.
I have heard the Minister of State argue that a great many companies are

looking at their affairs on a discounted cash flow basis and in that sense the costs of national insurance increases will be the same as the tax reductions. In my view, in the great majority of companies the national insurances increases will be treated as part of the costs, and will be largely offset by increased prices, whereas because most companies look at their situation from a pre-tax position, the real liquidity position—and I give this for the purpose of the argument to the Chief Secretary—would be increased because national insurance contributions would be largely offset, being part of costs, by increased prices. I accept that there would then be this increase in company liquidity arising from the reduction in corporation tax.
Then we have to examine the 50 per cent. selective employment tax reduction. From time to time we have been told by the Prime Minister, the Minister of Agriculture and many others, in speeches here and elsewhere that the greater part of the selective employment tax cut will be passed on in reduced prices. At the same time we have been told that it will also be available for increased company liquidity for further investment. Clearly, it cannot be for both, and there will be part for one thing and part for another.
I should have thought that the Chancellor must have made an estimate in arriving at his Budget judgment as to the extent to which S.E.T. would be passed on in reduced prices and the extent to which it would be retained for the purpose of improving liquidity and further investment. The Government owe it to the Committee to tell us what is that judgment. My view is that the Chancellor could not have imagined that a great deal of the cut would be passed on otherwise he would not have made it in that way because it would have had too great an effect on demand. It is not good enough for the Chancellor to say, on the one hand, that it will be passed on in reduced prices, and, on the other, that it will also be available for improving company liquidity with increased investment.
The amount to which it will go to each department must at least be known as an estimate. I accept that no one could known the exact way in which the reduction would be effective in terms of demand because we have never had this


sort of situation before, but the Chancellor in arriving at his judgment must have made that estimate, and it is not good enough for him to refrain from giving the judgment to this Committee.
Transcending the whole of this is the problem of money supply. We cannot say that there will be a cut of 2½ per cent. in corporation tax which in 1971–72 will put £55 million in the hands of companies while at the same time ignoring the fact that the Government are pursuing a particular form of money supply policy. Admittedly it is not terribly clear what that policy is and I hope that I will not embarrass the Chief Secretary too much if I quote one or two things in an endeavour to ascertain the Government's policy in this respect, because it is important for company liquidity. The first comment was by the Chancellor in his Budget speech on 30th March when he said:
I think it is now well understood that, important as monetary policy is as a means of influencing demand generally, it has no special magic for dealing with cost inflation, and it would be inconsistent with my Budget judgment to restrict the growth of money supply so as to reduce demand below the level needed to achieve a growth of output in line with the growth of productive potential.
That is reasonably clear. Then he said:
But, equally, the supply of money must not be so plentiful as to produce an additional boost to demand beyond that intention.
He then said:
Nor must it accommodate any further impetus to the rise in costs and prices.
I have a feeling that he must have read that a little later and decided, before he delivered his speech, that as it may not be too clear he ought to add a bit more.

Mr. John Nott (St. Ives): Can the hon. Gentleman help me? I thought that we were on a corporation tax Amendment. Since the reduction in corporation tax increased retained earnings of companies I am not clear where the money supply comes into the argument.

Mr. Barnett: I know that the hon. Gentleman is not as naive as that. He knows that money supply, bank lending and the rest, will have an effect on the whole problem of company liquidity. If he is arguing that money supply has no effect on the whole problem and what the Government are trying to achieve through their cut in corporation tax I

shall listen with great interest. The point I am examining is whether the Government would achieve the purposes outlined by the Chief Secretary in his opening remarks through cutting corporation tax.
Clearly this will be affected by the rest of the package, which we cannot ignore. We must take into account the whole of the Government's policy, and I am trying to find out what that policy is in this respect. I should have thought that the hon. Gentleman would be interested to know. I know that he has a great interest in these matters and I am sure he can control himself with patience until the winding-up speech from the Government Front Bench, when he will no doubt be enlightened as to the true effect of the whole Government package on companies and the effect of corporation tax in addition to the rest of the Government's policies.
I have been diverted and I should like to refer to what the Chancellor added to his remarks after reading through them. He went on to say, a little later:
But this does not mean that I intend the growth of money supply simply to accommodate the going rate of inflation. As the rise in costs and prices is moderated, so the aim will be to slow down the growth of the money supply. This will depend on the progress we make in de-escalation. I do not want to prejudge this or appear to set a limit to what can be achieved by laying down now a firm objective for money supply for 1971–72 as a whole."—[OFFICIAL REPORT, 30th March, 1971; Vol. 814, c. 1371–4.]
It was left at that for the time being. Then the Minister of State obviously felt that something more was needed, that probably it was not too clear what the Chancellor was intending to convey and possibly companies would not be clear as to what was likely to happen about money supply. On 1st April he attempted to explain the Chancellor's policies. He said:
The present choices for monetary policy are often presented as two distinct options—a neutral policy and a passive policy.
He then went on to explain this:
I take a neutral monetary policy to mean a growth in money supply equal to the underlying growth in productive potential, plus some allowance for an irreducible price increase based on past experience. I take a passive monetary policy to be one which accommodates whatever rate of growth in money incomes and prices is generated by the development of the economy.


That was his explanation of the two methods. He did not say which was the Government's.
4.30 p.m.
My right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) tried to elicit that information. He asked the hon. Gentleman
whether the Government's policy is closer to neutral passivity or to passive neutrality".
The hon. Gentleman was honest enough to say:
I am not sure that that would really clarify the position."—[OFFICIAL REPORT, 1st April, 1971; Vol. 814, c. 1803–4.]
So we still do not know what the Government are trying to achieve with their monetary policy. We are left in a state of suspended animation. The Chancellor will not finance inflation but, on the other hand, if wage escalation continues he will finance it—or will he? It is not clear, but no doubt whoever winds up the debate will tell us what the right hon. Gentleman had in mind.
Presumably—and this was made clear by the Chief Secretary—the Chancellor was not trying to increase company liquidity for its own sake; presumably he had something more in mind. He said that he did not wish simply to finance wage inflation, neither presumably was he doing it simply to maintain high dividends, although clearly it will, to some extent, do that. As the Chief Secretary said today, the objectives are to obtain an increase in investment and higher rates of growth.
But what led the Government to conclude that that was likely to happen when they made the decision to cut corporation tax, first by 2½ per cent., in October, and then by a further 2½ per cent? Presumably they assumed that some of the saving would go into increased investment. But did it not occur to the Chancellor that companies might simply say, "Thanks very much. The Chancellor has, at a stroke, increased our post-tax profits." Listening to the cheers of hon. Members opposite when the Chancellor spoke about this matter, one would almost have imagined that, at a stroke, he had increased real earnings.
The Chief Secretary made some astonishing comments today. One of his

major justifications for the cuts in corporation tax was that company profits had been low. I suppose one could argue that corporation tax should be cut even more so that companies have no incentive whatsoever to increase profits because they will get substantial increases from this beneficent Chancellor whatever they do. The Chief Secretary's argument today was very strange. It is clear that what most companies are doing is simply pocketing the benefits of the cuts in corporation tax and waiting for signs of prospects of selling the goods they produce. But there is absolutely no sign that the cut in corporation tax is achieving the purposes which the Chief Secretary has outlined. He told us that the effect on companies in 1970–71 would be a cut in corporation tax of £60 million.
Despite the prospective cut of £60 million, there has been no increased optimism in companies about their prospects. Indeed, when the Chancellor of the Exchequer made his forecast of what companies would be doing in investment he was not very optimistic, to put it mildly. Therefore, if his assumption when he made the cut was that there would be a great upsurge in company activity, it has not happened yet. Perhaps he convinced himself, when deciding to make the cut in corporation tax, that the international comparisons argued for a cut as a means of increasing growth and company liquidity to achieve his objective. But it could not stand up, because international comparisons in taxation are very complex and it is impossible to argue that one can prove by international figures that there is a need to cut corporation tax to achieve the objective.
When the Chancellor made his decision to cut corporation tax, he had no evidence that it would achieve any of the purposes which the Chief Secretary has outlined. I suppose that one could argue that it was a policy made up of faith, hope and charity for his non-profit-making friends. This is presumably what the Chief Secretary was arguing—the less profits companies made, the better off they would be.

Mr. David Mitchell: Will the hon. Gentleman explain what tax advantage is gained by a non-profit-making company as a result of a reduction in corporation tax?

Mr. Barnett: The hon. Gentleman had better ask his right hon. Friend the Chief Secretary, who argued that because companies' profits were low it was important to give them cuts in corporation tax. This was the justification. No doubt the hon. Gentleman will be able to take up his interesting point with the Chief Secretary.
It may be that the Chancellor will achieve his objective and that the cut in corporation tax will result in high growth and higher investment. But it would be bound to be fortuitous. If it happened, there would be a strong case for cutting corporation tax regularly to achieve that objective. But is it happening'? That is the important question. We must look at the matter as a whole. The Chancellor said that he planned to achieve a 3 per cent. level of growth. I do not accept that this is the extent of our productive potential. I do not accept that this country has a lower productive potential than our industrial competitors abroad. But that is the estimate of the Chancellor and of other people of our productive potential. It is not mine. The right hon. Gentleman planned to achieve 3 per cent. economic growth by all his measures, including the reduction of corporation tax. We must examine whether he has any chance of achieving his object.
The most recent survey which I have seen, taken shortly after the Chancellor's Budget Statement, was reported in the Financial Times of 3rd May. One of the major comments, based on the figures in the article, was on the general outlook. It said:
Order flows are barely keeping abreast of current production, and industry sees none of the boost that the Chancellor included in his Budget coming through for some considerable time yet.
Perhaps the cut in corporation tax will achieve something at some time, but there was no evidence on which the Chancellor could base such a judgment, and there is no evidence now that companies have taken his measures to mean that they should go ahead and expand in order to achieve his target. The major difference since then has been that unemployment has continued to rise. It clearly shows that, whatever the Chancellor had in mind about the cuts in corporation tax and his other measures, companies were waiting before they did anything.
I come to the real tragedy—the question of industrial investment. In the last Parliament we had speech after speech by the right hon. and hon. Members opposite on this matter. I remember the hon. Member for Horsham (Mr. Hordern) making some powerful speeches, with which I agreed, about levels of industrial investment which were higher than those being forecast by the Government. I have not heard one speech from the hon. Gentleman or any of his hon. Friends condemning the fact that the Government are now forecasting that industrial capacity will rise by a half of 1 per cent. Loyalty on the Government benches is being stretched very far. When for six solid years industrial investment was very bad—and I make no apology for it, and I condemned it at the time—and when the right hon. and hon. Gentlemen opposite made great speeches about the situation, it is strange that they should now say not a word of condemnation. It speaks volumes for something about hon. Members opposite, and I leave it to them to decide what it is.
The Financial Times survey, which was taken after the Budget, does not make pleasant reading because it found that order books were still thinning out. We were told that it would take time to get increased industrial investment and time for cuts in corporation tax to work. We at least expected to see orders coming through. But this has not happened. According to the survey:
Across industry as a whole order books are expected to go on declining…More companies are now expecting declining order books than an increase, but the greatest number (over two-fifths of the sample) are still predicting no significant change either way.
The survey goes on to say:
Of the three industries surveyed last month, the mechanical engineers and the paper/packaging group are the least sanguine—the engineers because of the drop in the demand for capital goods…
This is the situation after the Budget. And still not a word from right hon. and hon. Gentlemen opposite on this tragic economic indicator about industrial investment.
Government strategy about cuts in corporation tax have been ill thought out. First, we had the doctrinaire approach in regard to measures available to them in association with the Industrial Reorganisation Corporation, more effective


use of investment grant and the use of what might be called a pragmatic approach to the problem of money supply and bank lending. [Interruption.] I would define a "pragmatic approach" as not saying what one is intending to do for more than three months ahead. This is what the Chancellor has said. He told the House the other day what he was to do about money supply and bank lending over a period of three months, and he will not go beyond that period. The Chancellor must know that the 3 per cent. per quarter will in fact go on for a whole year. Therefore, his approach is to be regarded as pragmatic.
These things have been done for companies and the companies do not know what the devil is going on. They have had their tax cuts—which was all that was left to the Government to do since they scrapped all the other possibilities—and are still left bemused and waiting to see what will happen to the economy. As we see from the survey, what British industry has done—certainly the silent majority of British industry—by its actions is to pass a vote of no confidence in the Chancellor's measures.
One asks whether there there was a better way. I believe there was. It is not enough to improve company liquidity by cutting corporation tax. Of course, this will have a marginal effect and will have some effect on investment, but my experience is that the decision of many progressive and financially-sound companies not to expand is not because they are short of cash—they can get funds—but because of their inability to sell. They fear that if they buy new plant and increase production, they will not be able to sell the goods. They are not expanding at present since they do not know what will happen under the present Government's policy, particularly when they see unemployment rising at its present rate.

[Mr. JOHN ROBERTSON in the Chair]

4.45 p.m.

Yesterday the Chancellor said—no doubt from some knowledge the details of which we shall discover in a day or two—that the underlying trend of unemployment over the next month or two will continue to rise. In those circum-

stances, is it surprising that companies pocket corporation tax cuts and refuse to expand? They have been given these tax cuts, and it still has not given them the confidence to expand. If the money had been used directly to affect prices through purchase tax cuts, with the incidental but important effect of improving the possibility of talks with the T.U.C. on wage inflation, combined with hire-purchase relaxations and passing on the £290 million cut in S.E.T. to help the lower and middle income groups, then one would have achieved the social purpose of lower unemployment, demand would have risen, and companies would have seen their prospects for sales increase and would then have increased their production. Only then would one get the increase in new plant which is desperately needed—and one would get it with or without cuts in corporation tax.

There would be one disadvantage in the effect on the balance of payments, a situation which was already strong and which has been improved by the recent Deutschemark crisis to the tune of anything between £100 million and £140 million. I would rather risk a temporary deficit in going for a higher rate of growth than gradual erosion of the balance of payments surplus with low growth and low investment, which is what this Government are bringing about.

Mr. Peter Hordern: The hon. Member for Heywood and Royton (Mr. Barnett) was kind enough to mention the speeches I made when the Conservatives were in Opposition concerning the level of capital and industrial investment, and I should like to reply to what he has said.
The hon. Gentleman did his best to make a good story of a poor situation. Fancy being put up to attack—and, I presume vote against—a cut in taxation! It is a novel experience for any right hon. or hon. Gentleman opposite ever to face a situation of having to consider a cut in taxation, but I suppose the hon. Gentleman at least made the best of a bad job. He attempted, as do many people when confronted with a difficult if not impossible case, to erect a great smokescreen which consisted of a little dissertation on one or two matters.
No one is more addicted to monetary matters than I, but I do not intend to get led by the hon. Gentleman down that particular path. The plain fact is that monetary matters, and the monetary policy of the Government, have nothing whatever to do with the state of company liquidity at present. At the moment there is no shortage of funds to be had for companies, or indeed for individuals. The difficulty, if there is one, is for the lenders of money to find creditworthy borrowers.
The fact is that there is a considerable shortage of money within companies for the very good reason that the Labour Government did their best to drive down company liquidity by every means at their disposal. It is amazing that they should now have the effrontery to criticise us for reducing corporation tax when they themselves when in power succeeded in raising it from 37½ per cent. to 45 per cent. I do not know how many hundreds of millions of £s that took, but it must have been close to £200 million of extra taxation from companies while the Labour Party was in power. They have the nerve to criticise us for not encouraging industrial investment sufficiently. That was just one gesture they made to deal with company liquidity—they raised taxation from 37½ per cent. to 45 per cent.
But that was not all, by any means. The hon. Gentleman also had the nerve to mention the I.R.C. I think that he almost used the word "purposive" in that connection. I am delighted to see that the I.R.C. has disappeared. It was always in conflict with the Monopolies Commission. One heard of the I.R.C. telling companies that they ought to merge and the Monopolies Commission telling them that they should not merge. It is no wonder that companies were in doubt as to how to proceed. They had no help from the Labour Administration.

Mr. John Hall: Would not my hon. Friend also recall the severe blow dealt to company liquidity by the import levy, which was an interest-free loan to the Government?

Mr. Hordern: I am grateful to my hon. Friend. That was another example. Many others occur to me, notably selective employment tax on all service industries. When companies were not paying extra taxes, they were busy filling in forms for various Government Depart-

ments which proliferated under the Labour Administration. There was Schedule A also. It little behoves the Labour Party to criticise us for not encouraging companies sufficiently. Industrial investment is a very serious matter. Companies cannot be induced to invest for reasons other than a reasonable profit, or a profit—not "reasonable"—as a result of that investment. During the last six years the Labour Administration showed themselves so antipathetic towards profits, by increasing corporation tax and all the other devices that I have mentioned, that companies have found it very difficult to earn anything like an adequate reward on their investments.
The average return on industrial assets after tax has been reduced from 15 per cent. in 1964 to a little over 10 per cent. in 1970. Since the cost of borrowing under the Socialist Government continued to rise—when money could be obtained at all—and the cost of borrowing last year, and in 1969, was seldom less than 10 per cent., there was no point in the average industrial company investing in new plant and equipment. That is still the position today.
My right hon. and hon. Friends on the Treasury Bench have taken immediate action to try to put this matter right. In the Budget and in the Clause which we are discussing, they have reduced corporation tax, by two stages, from 45 per cent. to 40 per cent., and that increases company liquidity by an extra £60 million. But they have also reduced the level of Bank Rate. Thus the return which companies can now expect to earn from investments will be larger than the cost of borrowing. It is not a quick process—that is sure. But even though it is a gradual process, it will at least give companies the prospect of a really worthwhile return on investment. It is a very long time since that has been the case.
I do not think very much of the Opposition's case. The hon. Gentleman seemed to be suggesting that what we ought to have done instead was to cut purchase tax and thus, I assume, boost consumer demand, at the same time as having "useful talks" with the T.U.C. What were those useful talks to be about? I am glad that the right hon. Member for Ebbw Vale (Mr. Michael Foot) is present. I do not know what


he would have thought about those "useful talks" with the T.U.C. I suspect that, if there was any point in having useful talks with the T.U.C., they would have been about an incomes policy, possibly a voluntary one at first. But did not the Labour Administration try that to a considerable extent? What happened to that? Right hon. Gentlemen opposite will know. It finished up as a statutory policy. We had a "norm" and a Prices and Incomes Board dictating what the level of wages and prices should be. We had statutory orders by the dozen debated in the House on every occasion. I suppose that would have been the purpose of the discussions with the T.U.C. which the hon. Gentleman would propose. I wonder how many of his hon. and right hon. Friends would have welcomed that proposition. I do not recall seeing very much about it in their election manifesto. I wonder how many of them would care to fight an election on that policy. The hon. Gentleman knows all too well that he is talking absolute nonsense in suggesting useful talks with the T.U.C. He knows that the Labour Party would not support that suggestion, and that if there were such talks, they would end only in a statutory prices and incomes policy, which would never carry the support of his party, let alone the trade unions.
The Labour Party has no policy whatever for increasing industrial investment or for the economic progress of this country. It is high time that was said, and I am sure that it will be increasingly appreciated by the public.

Mr. Tam Dalyell: The hon. Member for Horsham (Mr. Hordern) will not take it amiss, having returned to finance debates after a forced absence of seven years, if I say that his was a remarkably "South of England" speech. Those of us in the North would not make that kind of remark about the I.R.C. When he speaks in that tone it is a reflection of the fact that things are very different in central Scotland and, I suspect, in the Manchester area, from luscious, beautiful Sussex. I say that not to provoke him but as a rather interesting reflection which went through my mind while he was speaking.
I was interested in what the hon. Gentleman had to say about the consider-

able shortage of money in companies. My impression, for what it is worth, is that he is right when he says that there is a considerable shortage of money in certain companies. But that may not be the case with other companies. Any kind of blanket pronouncement on this issue could be a little misleading.
It is true that there is a particular shortage in the motor industry; but the motor industry has its special problems. I ask for a comment from the Treasury Bench, because this is a very important subject to those of us who want more investment in our areas.

Mr. John Hall: I apologise for interrupting the hon. Gentleman so early in his speech, but would he not agree that an examination of the accounts of the vast majority of companies which make a major contribution to our industry would reveal a very acute liquidity shortage?

Mr. Dalyell: My impression is that there is indeed an acute liquidity shortage in some companies. I doubt that it is the "vast majority". But I should like to have a comment from the Treasury Bench about this, because it is very important.
I have two questions. First, what is the Treasury estimate of the effects of a cut in corporation tax? Is there any evidence that a cut in corporation tax will in any way lead to expansion? It is certainly my impression, gained from talking to a number of industrialists, that this is not the kind of consideration that would lead them to expand. Any claim that a cut in corporation tax will lead to expansion needs at least to be supported by some evidence. I ask for the evidence.
My second question arises directly from the Chief Secretary's speech. It was not immediately evident to me what he meant by this measure being more effective and equitable in redistributing among companies. This may be true. For my part, it was not a self-evident proposition. I hope that precisely what he meant will be explained and expanded upon.

5.0 p.m.

Mr. David Mitchell: I listened with considerable interest to the speech of the hon. Member for Heywood and Royton (Mr. Barnett). I was fascinated to


hear him say that a cut in corporation tax may well boost production but that there is no certainty about it. He went on to quote a survey which appeared in the Financial Times only four weeks after the Budget showing no increase in orders, suggesting that the Budget would be ineffective. If the hon. Gentleman cannot do better than that, it is hardly worth his trouble coming to the Dispatch Box. Before companies have even had time to hold board meetings in many cases, he expects to see orders flowing out to industry. I think that a little reality on the hon. Gentleman's part would do no harm.
The corporation tax reduction proposals in the Budget have to be considered against the background of a very serious level of unemployment and the fear that it may reach a million during the winter and against the background of inflation, the most inflammatory legacy left to the incoming Government by right hon. and hon. Gentlemen opposite.
I agree entirely with my hon. Friend the Financial Secretary, who spoke of the central need to encourage investment and of this being the first priority in dealing with the situation. If we are to stimulate growth and employment, this must be the absolute priority.
There are two worrying effects of low investment which should be kept in mind. First, if there is low investment, it means that there is less new plant, fewer new factories and less new machinery being installed, and consequent unemployment in the engineering and construction industries now. What is more, tomorrow, next year, in the future, there will be unemployment among production line workers who would otherwise have been employed in the new plant and the new factories and so on which should be going up at present.
The second worrying effect is that, if we do not have a substantial increase in investment, we shall lose many of the opportunities which going into the Common Market should bring us, assuming that the negotiations come to a successful conclusion. There is no value in having a tariff-free and quota-free market if we are not in a position to exploit it. Therefore, it is essential that there should be substantial encouragement to investment now so that we are able to grasp the

opportunities of increased production when the greater market in Europe becomes available. Those hon. Members opposite who have been calling for an increased market here and now should have in mind the broader and longer context of seizing the opportunities for a bigger market in Europe should the negotiations turn out well.
The Government's policy can be summed up as tight money and lower tax; in other words, profits which are hard to earn but worth getting. That seems to be the right course of action.
What are the alternatives? The hon. Member for Heywood and Royton claimed that the Government should be stimulating demand. In fact, he was going back to the old Keynesian approach. But Keynes is dead and, if we did not know it, the situation which the last Government bequeathed to my right hon. Friends of rising and high unemployment hand in hand with an inflammatory inflationary situation has surely made it clear that it is impossible now to apply the Keynesian solution.
If my right hon. and hon. Friends were to follow the advice of hon. Members opposite, all that they would do would be to provide the finance to pay the inflationary wage demands which it must be in the country's interests for employers to resist. Until the trade unions relearn the lessons of self-restraint and self-discipline which they had before the introduction of statutory control over prices and wages, there are enormous dangers for the country in pursuing recommendations like those which have come from hon. Members opposite, with the inflationary consequences flowing from them.
My second reason for believing that it would be dangerously wrong, at this time of all times, to stimulate demand by reducing purchase tax in the way recommended is that it would make us the soft underbelly of Europe so that, were we to go into the Common Market, we should be the soft, easy market to be penetrated by European manufacturers instead of our being the industrial potential setting out to seize the opportunities of prosperous markets in Europe. It is of almost overriding importance, should we go into Europe, to ensure that this country is ready to seize its opportunities.


It is right in the context of the Government's proposals to deal with the situation in this way.
The second alternative is that of massive investment grants. The effect of such a policy is to bring investment for the grant and not for the profit. It means the wrong motivation. It means encouraging basically uneconomic investment. It means enormous expenditure for the creation of a very small number of jobs. It means encouraging capital intensive industries which are not necessarily those which are most in need of stimulation at present.
Neither of those two alternatives is a satisfactory policy, and one is driven back to ask why investment is falling and why boards of directors invest at all. What is the motivation? I am not ashamed to say that the motivation is to make a profit. The House and the country should recognise that the driving force behind the private enterprise system is the prospect of making profits.
Profits are too low to make an investment worth while and to provide the cash flow needed to finance investment at present. I take up the point made by my hon. Friend the Member for Horsham (Mr. Hordern), who referred to the decline in the average industrial company profits on new investment from 14½ per cent. in 1964 to 10 per cent. in 1970. It cannot make sense, after tax has been paid, for companies to carry out new investment when that is the sort of prospective gross yield that they will make.
It is not popular to say that profits should be high and that the Government should make it more worth while for business men to invest. It is much more popular with the electorate to take the line of reducing purchase tax and encouraging a consumption boom. But, in reality, when I look at the present situation, I am reminded of a very wise man who once said: "You should use your heart to plan strategy"—we are agreed on strategy, we are agreed on the need for full employment and for growth—"but you should use your head to work out tactics." The Government are doing that at present. Our heads have to recognise that we do not help the wage earner by pulling down the wage payer. We do not create fuller employ-

ment by weakening the employer. We can provide work only by making it worth while for employers to go out and seize opportunities.
I believe that my right hon. Friend the Chancellor of the Exchequer is right in having made the 2½ per cent. reduction in the autumn and the further 2½ per cent. reduction in the spring Budget. I concur with the view of the hon. Member for Loughborough (Mr. Cronin), who asked whether there had been a change between the autumn and the spring. The answer was given to him that there had been a change, because the situation had deteriorated and there was a need for greater encouragement. It may be that, by the autumn, we shall see that there is still a need for further encouragement.
In supporting this reduction in corporation tax, I express the hope that the Chancellor will have a flexible approach to the possibility of going further with the policy on which he has already started.

Mr. A. E. Cooper: As I listen to hon. Gentlemen opposite I begin to think that I am at a kind of Mad Hatter's tea party. The kindest thing I can say to the Hon. Member for Heywood and Royton (Mr. Barnett) is that I am very glad that he does not audit my company's books and assist the board in its general policy for the future.
The hon. Gentleman tells us half a story. He talks about corporation tax and a reduction of 5 per cent. as if this were the sole reason that companies should have more money to invest and that we should not be doing this anyway. He should realise that we do not get this money for another year and a half. We are not debating corporation tax for this financial year. We are debating corporation tax which will be paid on profits earned in this year and remitted to us in the next financial year. So we have very little time in industry to recoup anything at all.

Mr. Barnett: The hon. Gentleman will get it in January, 1972, which is in approximately seven months.

Mr. Cooper: We have not yet got the money to spend. I hope that I shall not be thought unparliamentary in saying that it is a damned impertinence for hon. Gentlemen to talk in this way when


they, and they alone, are responsible for the lack of liquidity in our companies today. We never hear hon. Gentlemen opposite talk about the devastating effects of Schedule F. The hon. Member for Heywood and Royton should know—he is an auditor and accountant by profession—that every company which pays any kind of dividend suffers tragically under the effects of the Finance Act, 1965.
If hon. Gentlemen want evidence about this, I can give them one example which is the experience of thousands of companies in this country. There are many companies with a capital of between £4 million and £5 million, a turnover of, shall we say, £12 million to £14 million, and which make about £1 million profit. Before the 1965 Act and the introduction of Schedule F a company could expect to pay out in profits and income tax about 52½ per cent. of its total. It then had its dividend to find, and its retention out of the £1 million profit would be about £125,000 to £140,000. This was the experience of thousands of firms in this country. It was from this retention in excess of £100,000 that the money was found to reinvest and to expand in industry. The hon. Gentleman and his friends killed that with the introduction of Schedule F. Companies earning the same money and paying the same dividends, instead of having a retention of about £125,000, then had, if they were lucky, £5,000. I know of companies where the retention has been as little as £1,200 in a year. How do hon. Gentleman expect any company to invest that kind of money? What kind of confidence can any industry have in a Government who allow that kind of thing to go on?
Then right hon. and hon. Gentlemen opposite made it even more difficult. They put such a tight squeeze on the banks, that, even if a company was credit-worthy, it was difficult for it to get the money, and if it got the money it had to pay penal interest rates—the highest in the history of this country. This is one reason that we are in this situation.
Here we are, only nine months in Government, clearing up the worst mess that any Government ever inherited and being expected to promote miracles overnight.

The responsibility for the present situation rest fairly and squarely on the last Government, of which the hon. Member for Heywood and Royton was a firm supporter. We intend to wrap this albatross around their necks and to make it stick.

5.15 p.m.

Mr. Robert Sheldon: The hon. Member for Ilford, South (Mr. Cooper) said that he did not expect his Government to promote miracles overnight. I am prepared to accept that. However, I should have hoped that they might have done something in two years. I should have thought that two years, being approximately half the average length of a Parliament in recent times, would have been sufficient for them to have done something about the level of investment.—[HON. MEMBERS: "We have not been in Government for two years."]—If hon. Gentlemen will wait, they will see where the two years come from. Looking at the Financial Statement they will see that on the Treasury's own forecast, after this splendid Budget and this splendid reduction in corporation tax which they have welcomed so much and which I accept, by June, 1972, two years after this Government came into office, the level of private fixed investment will reach an increased figure of one half of 1 per cent. Apparently it will take two years to achieve that.
Promoting miracles overnight is not something which I expect from this Government, but I might have hoped for a level of competence. Based on this Budget judgment, given effect to by this House—we are discussing an important aspect of it today—if we see the investment which the hon. Member for Basingstoke (Mr. David Mitchell) rightly demanded as one of the important tests of the capacity, capability and understanding of the Government of British industry, we might have expected a higher figure than that which the Financial Secretary estimates will be the outcome of these brave, bold measures.
The Financial Secretary must be indicted by his own figures. If this is all that we get as a result of these measures. it is clear that, however much they may be lauded by the Chairman of the Economic and Finance Group and by


other hon. Members listening to the debates, they fail by the test carried out by their author.

Mr. Barnett: Will my hon. Friend consider giving some advice to some of the loyalists on the benches opposite about what happened to the loyalists on those benches in the last Parliament: how they were overtaken by events almost every month, when they were saying that we should not do this, and the Government did it; that they should not talk to the T.U.C., and presumably they soon will; or that they should not inflate demand anymore, and presumably they soon will. Will my hon. Friend consider advising loyal hon. Gentlemen opposite that they should not be too loyal?

Mr. Sheldon: That is a very good point. There will be a stage for some learning process to take place among back benchers opposite who defend their Government month after month for the action which they take and then express surprise when the Government change their attitude and leave the back benchers high and dry. There is a moral for this for all back benchers in all Governments. It is important to realise that an understanding of this will perhaps come as a greater surprise to some hon. Gentlemen opposite.

Mr. Hordern: Is the hon. Gentleman proposing to take up the time of this Committee in the way that he did on the House of Lords (Reform) Bill?

Mr. Sheldon: I should have thought that an intervention from the hon. Member for Horsham (Mr. Hordern) would have been rather better framed than that. He must know that the Government have stated that one of their important objectives is to increase investment, which is welcomed by the whole House. We say that if, after two years, we get only a half of 1 per cent. increase, then, with half of this Parliament gone, we must see some of the further measures which have yet to come.
There is another aspect to this, and it is one that must concern right hon. and hon. Gentlemen opposite. It is the level of bankruptcies. One of the sad aspects of industry over the last few months has been the inordinately high level of bankruptcies. We know that during the last

quarter of last year insolvencies were at their highest level for the past ten years. Will these companies be helped by the reduction in corporation tax? The answer is that of course they will not. It is irrelevant to them.
The hon. Member for Basingstoke (Mr. David Mitchell) talked about the folly of increasing demand and making us the soft under-belly of Europe. We have 800,000 people unemployed. Why not increase demand to make use of that manpower? At the moment this situation is a burden on our economy. It is not something that helps us to get efficient organisation throughout industry. It is a burden which will have its economic and social disadvantages made clearer as time goes on.
We know that the Government took a number of decisions rather too hurriedly, but the worst decision of all was the one to abolish investment grants at a time of industrial uncertainty. One can argue in favour of investment grants, or in favour of investment allowances of one kind and another. There are arguments on both sides. I am strongly in favour of investment grants, but I can understand those who say that the principle should be that of profitability. There is a case for that. Though I disagree with it, a case can be made for that view, but what was so bad was the timing of the Government's decision.
What one does not do is change over from one method of providing investment incentives to another at a time when industry is experiencing its greatest doubts about its own future. Industry might have been helped, even by those who wanted to change the system from one of grants to one of allowances, if the decision had been made to wait a few months to allow industry to carry on with its plans without asking it to reassess those plans at a time of diminishing confidence. This was not the time to change from grants to allowances. The Government might have waited until confidence had built up—if it is to build up—and made the change at some time in the future when industry was more prepared to look again at its investment policies.
The Government have made big, bold changes, but I believe their decision to change the investment grant system to be one of the most disastrous changes of all. On reading the Government's forecast in


the Financial Statement, which was prepared in the light of their Budget judgment, one can see that they have led industry astray, and the decline in investment is the direct result of the Government's bringing in these changes at this stage.
The change in corporation tax will provide very little assistance. I accept that the fundamental reason for investment is the prospect of profitability, arising from the sale of a company's products. A reduction in corporation tax does not help in that respect. It does not lead a manufacturer to expect an increase in his sales and, therefore, in his profitability.
What the Government should, and could, have done, faced as they were with a situation of massive and rising unemployment, was to use some of those people by increasing, though not massively, the level of demand. This would have increased the expectation of companies about their prospects for investment. If the Government had been prepared not to change from grants to allowances, companies would have been enabled, at a difficult time, to make their calculations in the way that they had been accustomed to doing.
Those are matters in respect of which the Government have failed. As a palliative, they have offered a useful but limited measure which is inadequate for the task given to it by the Government.

Mr. John Hall: I had not intended to take part in the debate, but I am driven to my feet in some bewilderment. When I first saw that Clause 8 had been selected for debate on the Floor I thought that that had been done because the Opposition attached great importance to it, and that the maximum amount of publicity would be directed to its provisions. One therefore expected to find the Committee fully attended, certainly on the benches opposite, by hon. Members who were anxious to attack the Government for introducing this Clause, and the philosophy that lies behind it.
I have found it difficult to recognise a coherent attack against the Government by the few hon. Members who have taken part in the debate from the benches opposite. The speech of the hon. Member for Ashton-under-Lyne (Mr. Sheldon), good as it was, was directed mainly to the question of investment grants. It is a little

puzzling to know precisely why we should be debating this Clause on the Floor, in view of the complete absence of any worthwhile attack by the Opposition, and I should have thought that they could well have allowed the Clause to go upstairs with the rest of the Bill.
I shall make only one or two references to the effect that the Clause might have. There has been some discussion about the liquidity of companies. There is no doubt that, under the previous Administration, many companies found themselves in difficulties. Quite apart from the burden of taxation, and the rate of corporation tax which ruled under the previous Administration, there was the problem of what I call the double taxation of distributed income. In an earlier intervention I referred to the fact that companies that were importing were forced to make interest-free loans, of considerable size, to the Government for a period of time, which threw a great strain on their resources, particularly as they had to do that at a time when it was difficult and expensive to raise money through the normal banking channels.
In recent months some major undertakings have had to raise large capital sums at high interest rates. One major company, which is a household name, raised money at a figure which was no lower than the return on its capital employed. There is not very much future or encouragement for any company to engage in further expansion, especially in the highly capitalised industries, if that is the kind of return that it gets.
It has been suggested that companies will not be encouraged to expand to any extent by the measures included in the Clause. The hon. Member for Ashton-under-Lyne said that the increase in investment between now and the end of the second year would be marginal. That seems to indicate that perhaps we are not doing enough. It is true that neither Government found the answer to the problem of stimulating investment to the level at which it should be. Perhaps we should consider measures other than that of reducing corporation tax. But there are a number of considerations which are taken into account by any company which is deciding whether to expand. The first was mentioned by the hon. Member for Heywood and Royton (Mr. Barnett) when he said that companies must be


able to sell, that if they think that the market is drying up, they are not encouraged to sell, and that a large unemployment figure discourages expansion.
5.30 p.m.
It is true that one does not lay down plans for an expansion of plant and building if one thinks that the market is static, but one does not consider the market only in the immediate term; one takes a long-term view. It takes a long time to develop new investment. One does not lay down new plant and erect new factory buildings in a matter of months: it may be a matter of years. What we devoutly hope is that short-term unemployment will not affect long-term plans.
What does affect them is the likely profit on long-term investment after tax. Certainly, up to recent years, the profit which could be expected was in many cases too small to encourage further expansion. One example has been mentioned already, where the profit was almost non-existent after paying the cost of the new capital which had to be borrowed. Many cases can be cited of companies which have been dissuaded from expanding either at all or at the rate which they might otherwise have done, because they knew that their marginal profits after tax did not warrant the risk.
In the sophisticated industries of today, considerable investments are required. If one is to be asked to put down several million pounds, one has to have a reasonable expectation of profit within which one can pay a fair return to one's shareholders and put aside reserves for future development. So to that extent I welcome the reduction in corporation tax to which the Clause gives effect, and I should have thought that the Labour Party would have been prepared to welcome it as well. I gather from one or two of their remarks that they are not opposing it.
Like my hon. Friend the Member for Horsham (Mr. Hordern), I can understand their difficulty, because it is so unusual for them to be debating a reduction of taxation. It must seem to them that the atmosphere, the whole context of the discussion, is wrong, because it deals with tax reductions, and their philo-

sophy and the general direction of the policies of the previous Administration have been to increase taxation. I do not say whether that is right or wrong, but that is what has inevitably happened under every Socialist Administration.
I support the proposals in the Clause. By itself, it will not produce the revitalisation of industry to which we look forward, and other measures will have to be introduced. Also, to disabuse anyone of the idea, if it remains, that we welcome unemployment, I do not think that unemployment is likely to be a cure for our ills in the short or long term. Not to be using the vital part of our national wealth which lies in our labour is a tragedy and in the long term will be disastrous for the nation. So we have to turn our attention seriously to finding out how to cure this ill. We should not try to attribute to anyone on either side the idea that he welcomes unemployment, for whatever reason.
I doubt whether we shall find any strong or determined opposition to the Clause, whether or not there is a Division. I am certain that, in their hearts, the Opposition welcome this as a step in the right direction—although no doubt they want other things as well. I have no doubt that we shall be able to commend the Clause, with satisfaction and success, to the Committee.

Mr. Cronin: I am a little puzzled by the arguments of the hon. Member for Wycombe (Mr. John Hall), that taxation of company profits will reduce their incentive to invest further. I believe that he said that, because corporation tax was so high, the amount left after taxation was often too small to justify further investment. But surely that is a reason for seeking more profitable ventures, for increasing profits. I should have thought that it was more an incentive to increase efficiency, or that there was an argument in that direction.

Mr. Hall: The hon. Gentleman is right to say that, if one finds that one's returns are diminishing, it is an incentive to try to increase efficiency and reduce expenses. That is one of the reasons for the increasing unemployment. But it is a discouragement to invest large sums in new plant and buildings, when experience shows that, however, efficient one is, one's return after tax will be small.

Mr. Cronin: I believe that there is some agreement between us, although I do not follow the hon. Gentleman's main conclusion.
The Chief Secretary suggested that a reduction of corporation tax would increase company liquidity. No one will disagree with him there, but it will require a big jump in our intellectual reasoning for us to believe that it will necessarily increase investment. A substantial proportion of companies will simply sit on their increased liquidity. Hon. Members on both sides have made it clear that the whole incentive for increased investment is the prospect of future profit, and the mere fact that a company has increased liquidity is not necessarily an indication that it will increase its investment. Surely it increases its investment only if it sees an outlet for its goods which will bring it increased profits. So I suggest that the Chief Secretary is taking us a little too far when he jumps from increased liquidity automatically to increased investment. There is a very limited connection between the two. I do not think that any hon. Member with business experience will disagree with that.
The other thing to remember is that any increased liquidity which a company has will not necessarily mean that it will invest that additional money in the most effective way or so as to bring the best return on capital. We all know that quite a few large companies, some of them household names, are grotesquely inefficient, in that they have a very small return on their capital assets. I am not at all sure that few companies like that, given increased liquidity, would invest that money in the most effective way.
It is easy to assume that there is something intrinsically good about investment, irrespective of its quality. After all, when a company invests, say, £1 million in a new factory, that is £1 million worth of raw materials, labour and imported goods being set aside for a purely future benefit, but quite often some of these investments are written off completely. Ineffective investment by inefficient companies does not add materially to the economic prosperity of the country. I suggest, therefore, that not only is there some doubt whether increased liquidity will produce increased investment but there is considerable doubt whether this proposal will improve the efficiency of companies.

Mr. John Hall: Is the hon. Gentleman arguing that because some companies do not invest efficiently, taxation should not be reduced, and that in his view the Government should retain the money themselves and invest in place of private industry? If that is his view, would he say that experience had shown that to be successful?

Mr. Cronin: I am not arguing that. I am simply pointing out that the Chief Secretary put forward this proposal as an important cure for our present ills. I am merely suggesting that it is not necessarily a cure and that it will be of limited value.
There are more effective ways of increasing efficient investment. That we have 800,000 unemployed shouts in the most stentorian tones for companies to be encouraged to increase their investment. However, the circumstance demands a substantial reflation of the economy. What other measures does the Chief Secretary have in mind, apart from this reduction in corporation tax, to increase investment?
My hon. Friend the Member for Heywood and Royton (Mr. Barnett) said in his able speech that more effect would be obtained by a reduction in purchase tax, so channelling purchasing power into the hands of the low-income groups. As he pointed out, that would result in larger profits for companies and would be likely to result in increased investment. Changes in direct taxation directed to the lower-income groups would also generate more purchasing power, and would also be more effective. Changes in Bank Rate and credit restrictions would help investment. All these actions would increase the incentive to invest out of all proportion to the limited effect that this reduction in corporation tax will have.
Confidence is all important in investment decision. An important aspect of our affairs in which there is a lack of confidence at present is the steady continuity of labour troubles, with strikes and general industrial unrest. The Government have lost the confidence of trade unionists throughout the country, and that is one of the major causes of the industrial troubles that we have been witnessing. These troubles are themselves an inducement not to increase investment. By their mini-Budget, this Budget and


the Industrial Relations Bill, the Government have done everything possible to exasperate trade unionists and to cause the maximum amount of industrial unrest.

Mr. John Hall: rose—

Mr. Cronin: It is likely that if I keep giving way to the hon. Gentleman my speech will seem like a dialogue between us, and that would be boring for all concerned. I am sure that he was about to make a weighty comment and I give him credit for it without his making it.
5.45 p.m.
The Chief Secretary said, in favour of reducing corporation tax, that profits were falling, which seems a surprising argument to use. After all, does it mean that the lower a company's profits, the sooner the Government will step in to reduce its taxation? I would hardly have thought that lower profits were a good reason for reducing corporation tax. This reduction will increase company liquidity irrespective of whether it is used effectively or whether the company needs more liquidity. Indeed, this reduction of corporation tax will operate in the opposite direction to Darwin's theory of the survival of the fittest. This tax reduction will tend to bring about the survival of the fattest.
Hon. Gentlemen opposite claim that corporation tax operates as a disincentive to profits. I suggest that it can act as an incentive for making more profits. The same argument can be used for personal taxation. Not sufficient emphasis has been given to the fact that taxation gives a real incentive to increase income or profit as the case may be. The argument that corporation tax is a disincentive to making profits cannot be taken as an absolute fact.
I am a director of a company which during what hon. Gentlemen opposite describe as the terrible years of the Labour Government steadily increased its profits by about 25 per cent. a year. I believe that other efficient firms have done the same, simply because they do not regard corporation tax as a disincentive. It is an incentive to be more efficient and to make more profit, thereby obtaining more liquidity to invest and so making bigger profits still.

Mr. John Hall: In what line is the hon. Gentleman's company?

Mr. Cronin: Electronics.

Mr. Barnett: Congratulations.

Mr. Cronin: This reduction in corporation tax will not be effective in curing our economic problems. It will merely increase company liquidity. It will be a bonus to companies which, from the point of view of hon. Gentlemen opposite, is probably not a bad thing in view of the way in which so many firms subscribe handsomely to the Conservative Party. In other words, the Government are showing their gratitude by handing some money back to the companies who contributed to their electoral funds. Gratitude is a worthy emotion, we are all sympathetic to those who feel grateful. I suggest, however, that the gratitude which the Government are showing in this Budget by handing money back to companies will not have any useful effect on our present economic situation.

Mr. Christopher Tugendhat: It is a pleasure to speak following the hon. Member for Loughborough (Mr. Cronin) because he made a number of fascinating points, among them the fact that his own company had increased its profits during those unfavourable years of Labour Administration.
His argument about corporation tax acting as an incentive overlooked a crucial point in the present state of our economy—the fact that a substantial proportion of the most important industrial investment in Britain is conducted by international companies.
It is no good saying that a company, whether British or foreign-owned, which has it in its power to invest here or abroad, will be encouraged by a high level of tax here to invest in Britain if other countries offer greater incentives, better markets and so on. It is an extremely dubious proposition that corporation tax acts as an incentive to anybody. It certainly does not act in that way to a company which is faced with the choice of building a plant here or elsewhere in Europe. To suggest that by jacking up the rates of corporation tax we shall encourage such a company to place its


plant here is to adduce an extraordinary proposition. I cannot help feeling that the hon. Gentleman must have overlooked the crucial place in our industrial investment position of international companies faced with that choice.
There appeared to be some disagreement or difference of opinion among hon. Members opposite on the general matter under debate. One hon. Gentleman suggested that there was not a liquidity squeeze and he wanted the Chief Secretary to produce evidence to support his contention that companies were short of liquidity. Another pointed to the present high level of bankruptcies. The high level of bankruptcies goes a long way to substantiate the argument that there is, in fact, a grave shortage of liquidity in the economy. I am sure that Opposition Front Bench spokesmen will agree on that, even if they do not necessarily agree with the means which we are taking to overcome it.

Mr. Dalyell: Yesterday, in connection with the regulator, there was discussion of the problem raised by the multinational or international company. Will not the hon. Gentleman go further and say that the whole tax system and the rules of the game relating to it must be altered as a consequence of the increasing, and welcome, appearance of the multi-national company? That alters a great deal beyond the corporation tax, does it not?

Mr. Tugendhat: I entirely agree, and I hope that the hon. Gentleman will read the book on the subject which I have written, which is to be published later this year, in about July. I shall be delighted to tell him when the publication date has been fixed. I have many suggestions to make in that book on the subject which he raised, and I thank him for the opportunity to give it a plug.

Mr. Barnett: The hon. Gentleman referred to the growing number of bankrupt companies. A cut in corporation tax is not likely to help that sort of company.

Mr. Tugendhat: I should not dream of crossing swords with the hon. Gentleman about that. It is true that, if a company is bankrupt, a cut in corporation tax will not help. But I am sure that he will agree equally with me that

if a company is subjected to a considerable liquidity squeeze and is having great difficulty in earning profits, a cut in corporation tax may well prevent that unhappy eventuality.

Mr. Joseph Hiley: It may prevent some future bankruptcies, may it not?

Mr. Tugendhat: I did not make myself clear. That is exactly it: it would prevent some bankruptcies.
The hon. Member for Heywood and Royton (Mr. Barnett) made great play of the Financial Times survey. I felt that he did not do himself justice in mentioning that survey without mentioning the previous one which also appeared after the Budget. I think it not unreasonable to take the two together.

Mr. Barnett: The hon. Gentleman will know—none better—that the Financial Times survey which I quoted showed, as it were, the running figures. I was referring to that.

Mr. Tugendhat: Yes, but there have been two surveys since the Budget. The survey which the hon. Gentleman mentioned showed the sad state that industrial investment was in, lending considerable weight to the Chief Secretary's argument that a stimulus was needed. The earlier survey, which came out a week after the Budget, showed that the overwhelming majority of business men believed that the Budget measuers will do a great deal to stimulate investment and that they were already envisaging this prospect.
It is unreasonable to suppose that in the three or four weeks which elapsed between the Budget and the publication of the survey which the hon. Member for Heywood and Royton quoted the flow of new orders would have been reflected in the figures. One would expect several months to elapse before companies began to take the decisions which would lead to new orders.
I agree with the hon. Member for Heywood and Royton, however, that one cannot look at the cut in corporation tax in isolation. One must look at the whole context of the economy, since the cut in corporation tax is only one factor among many. I differ with him, perhaps, in wishing to look at a rather different range


of factors in the economy from those which he took.
There are several reasons why we have had such a low rate of investment in recent months and why the outlook is not as promising as one would wish. Partly, it is the high level of inflation, partly it is our deplorable strike record, and partly it is the fact that British delivery dates in so many major capital projects tend to be extremely unsatisfactory in comparison with our competitors on the Continent.
The hon. Member for Heywood and Royton and other hon. Members referred to the growing number of British companies which now assess their investments on a discounted cash flow basis. The hon. Gentleman will be aware—none better—that, if a company is assessing its prospects on a D.C.F. basis and the project is completed in 24 months, say, instead of 16, this knocks any D.C.F. calculation for six. This, also, is a considerable disincentive.
In that connection, I refer hon. Members to the extremely interesting report on the chemical industry published last year by the "Little Neddy" for that industry, which inquired into why the level of investment in the chemical industry was so much lower here than on the Continent. One of the chief reasons which it mentioned was the fact that completion and delivery times on capital projects undertaken in Britain were much slower than on the Continent and were also unreliable. Our strike record in this country plays an important part in that, because strikes on site tend to delay completion of such projects. In the context of the international company, the chemical company, the aluminium company, the oil company and the motor vehicle company—companies which make the decisions which are the key to a great many investments in our economy—these factors play a most important rôle.
I return to the immediate question of the corporation tax. It is impossible to deny that, during the past six years, profits have been squeezed. The figures are well known: as a proportion of gross national product, gross trading profits fell from 14·8 per cent. at the beginning of the last Labour Government's period

of office to under 10 per cent. at the end. Of course, it would be desirable to push up gross profits as well as anything else, and a cut in corporation tax does not do that, but a cut in corporation tax certainly helps in regard to retained profits, and in the present situation that is an important gain. For one thing, it enables companies to keep more money for investment. For another, it improves the attractiveness of equity investment. I am sure that hon. Members opposite will admit that one of the advantages of a rising stock market is that it makes it easier for companies to raise money by rights issues and in other ways, and this also helps in the liquidity squeeze which we have been having.
Another advantage of the cut in corporation tax is that it does a great deal to restore confidence to the corporate sector. I find myself in some disagreement with those hon. Members, some on this side and some opposite, who have suggested that the most important reason why companies invest is the prospect of earning profits. For the very large companies, numerous surveys conducted on the subject show that the most important single reason out of many is the prospect of increasing sales, the prospect of increasing market share, and the desire to hold market share. For that reason, a high rate of investment tends to flow from high growth rather than to precede high growth.
The real difficulty for a country such as ours, which has had such a poor growth record over many years, is to set the virtuous circle going. By itself, a cut in corporation tax will not do that, and a great many other measures throughout the economy have to be taken to achieve it. The cut in corporation tax, however, has one important effect, and that is precisely on confidence. It is at this level that one can try to set the virtuous circle under way. It enables companies to see the possibility of earning reasonable profits. It changes the climate in which decisions are taken.
That is why this measure, although modest, is desirable. It is desirable because of its effect on companies which have had their profits badly squeezed in the United Kingdom during the past few years. It is desirable also because of the effect which it should have on the investment decisions of international companies


which can choose where to put their investments. It is desirable for both those reasons, although, as I say, it must be looked at as one measure among the many which this Government have taken and will continue to take.

Mr. Dick Douglas: I am grateful to the hon. Gentleman for giving way, especially as I was not present to hear the whole of his speech. Will he not concede that a much more potent factor for international companies in determining the level of investment in this country is the prevailing situation as regards investment grants rather than taxation. That is particularly true in Scotland, is it not?

Mr. Tugendhat: I had completed my speech, but I shall add a few words in response to that point. I disagree absolutely when the hon. Gentleman suggests that investment grants are the most effective way of doing it. Investment grants, in effect, act as a bribe to companies to undertake investments which they would not otherwise undertake. To that extent, they do on many occasions succeed in distorting the normal investment criteria. Scotland presents a good example. Investment grants can be very effective in attracting new industry for a certain period, but the disadvantage of the way in which they bribe companies to take decisions which they would not otherwise take can be seen in the hon. Gentleman's own country.

Mr. Sheldon: All investment incentives do that.

Mr. Tugendhat: They bribe companies to take decisions which they would not otherwise take. The plants come in, therefore, on the basis of non-economic criteria, and they tend to be the first plants to be closed when the cold winds begin to blow. We have seen how successful Scotland has been in attracting investment from foreign companies by such incentives, but we have seen also how Scotland has suffered when those companies have been the first to start closing their plants and laying off workers when they ran into trouble in their overall operations. Investment grants have the great danger that they bring in companies which are apt to disappear as soon as the cold winds begin to blow.

[Mr. OSCAR MURTON in the chair]

6.0 p.m.

Mr. Nott: The Member for Heywood and Royton (Mr. Barnett) is not present in the Committee at the moment, but I wanted to say to him—perhaps he can read it in HANSARD tomorrow—that he gave a remarkable discourse on the money supply, but it had nothing whatever to do with the reduction in corporation tax, which is a question of the retained profits of companies. He extended the debate into the whole field of the regulator, which was discussed yesterday.
Secondly, he talked of companies pocketing some of the corporation tax benefits which have just been given. But the reason why companies tend to pocket some of the corporation tax benefits derives directly from the 1965 Finance Act which my hon. Friend the Financial Secretary, in the Green Paper, is proposing to change. This debate should not pass this issue without reference being made to the relationship between the reduction in corporation tax and the proposals in the Green Paper on corporate taxation because the two are closely related.
At one stage the Member for Heywood and Royton, speaking with all the authority which his profession as an accountant commands, and backed by his status as an Opposition Front Bench speaker, corrected the remark made by my hon. Friend the Member for Ilford, South (Mr. Cooper), although this correction was inaccurate. He said that the corporation tax reduction would benefit companies only on 1st January, 1972. That applies to the 2½ per cent. in the Budget, but the 2½ per cent. announced in the mini-Budget accrues to companies on 1st January, 1971, so that part of the benefit has already been received by British industry.
The hon. Gentleman added—and this point was also made by his hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon)—that there is no evidence yet that the Budget measures will improve industrial investment. The hon. Gentleman was referring to the forecasts. It is very hard to understand how British industry six weeks and one day after the


Budget statement could possibly have decided on its capital investment programme for 18 months ahead. At this early stage that is too much to expect.

Mr. Sheldon: That is not the point I made. My point was that the Financial Secretary's own forecast was that investment up to the first half of 1972 would increase by only half of 1 per cent. That was his own forecast, based on his estimate of the effects of the Budget.

Mr. Nott: I had not taken that point, and I accept the hon. Gentleman's correction. I normally agree with my hon. Friend the Financial Secretary, but perhaps he will be proved mistaken. I am sure that he will be delighted if he is, and I think that he will be.
The reaction from the Budget, which is only now beginning to show, is such that the confidence of British industry is seen to have been substantially restored by the Budget measures. I expect that when the next survey of capital investment intentions is made it will be very much more optimistic than was the last survey. We shall have to wait and see.
There is no section of the Budget of which I approve more than that relating to corporation tax. When we debated corporation tax in Committee on last year's Finance Bill, my hon. Friend the Financial Secretary said:
It is said that companies have no body to be kicked and no soul to be damned. But the simple fact is that companies and those who manage and work for them are responsible for the overwhelming proportion of the process of wealth creation which goes on in Britain today. If companies are hampered by too heavy a burden of taxation, or by the wrong kind of taxation, the effect on the national effort will be serious and all our objectives will be frustrated."—[OFFICIAL REPORT, 13th May, 1970; Vol. 801, c. 1259.]
I could not agree more with that statement. Reductions in corporation tax should take priority over reductions in personal taxation. Until the company sector begins to work again I do not believe that we shall see the wealth being created out of which we can generate all the additional material benefits which this country needs.
The Green Paper, which is related to the corporation tax reduction, is the single greatest breakthrough of the

Budget, certainly in Parliamentary if not in economic terms, after six years of Socialist blindness to the fact that this country has the highest rate of tax on distributed profits of any country, except Holland, in the Western world. That lies at the heart of our industrial problems. The hon. and learned Member for Lincoln (Mr. Taverne) nodded assent when I referred to Holland. The Green Paper recommends that we should go for the German rather than the French system, and I believe that this is correct. But the Common Market Commission will in due course try to unify the company taxation systems of Europe, and we could be landed again with the system which we abandoned in 1965. I trust that that will not happen, but we do not have entire freedom if we enter the E.E.C.

Mr. Hugh Dykes: Does my hon. Friend agree that that was another argument implicit in the Government's reduction of corporation tax? When we moved from the 1965 system, whereby the company paid tax also on behalf of the shareholders, the previous Socialist Administration indulged in a much greater increase in tax overall than is taken into account when we merely compare the rise from 37½ per cent. to 45 per cent., followed by our reductions.

Mr. Nott: I understand my hon. Friend's point, but I was on a different question, related to the Tempel Commission Report. My hon. Friend the Financial Secretary said one or two things about Professor Tempel and his Report in Committee last year. I will not read them out, because now that he is in a position of authority and we are negotiating to enter the E.E.C. I think that he would prefer me not to repeat his comments on the Report. I hope that it is not adopted by the E.E.C., but it looks as though we are more likely to have either the French-Belgian system in the E.E.C. or the system recommended by the Tempel Report, than to have the German system. I like the German system best, and that is the Government's recommendation in the Green Paper, but the matter is open for debate.

Mr. Cronin: Did not Professor Van den Tempel in his Report for the Commission in Brussels make recommendations substantially the same as the changes


introduced by my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) in 1965?

Mr. Nott: That is what I meant to say. I apologise. That is the system which we are abandoning. I consider that its introduction was a retrograde step.
In opening the debate, my hon. Friend the Chief Secretary talked about the fall in investment and company profits, and quoted a number of very interesting figures. I have figures showing that in 1956 company net cash flow amounted to 11½ per cent. of our gross national product and in 1969 to 8½ per cent. There is a whole host of figures that we could give to demonstrate that British industry has become extremely illiquid over the past 10 years. I shall not bore the Committee by giving the figures, because I think that this is generally known.
Even my hon. Friend's figures tend to understate the seriousness of the position. He took perfectly valid figures of published profits, but I think that they were net trading profits after depreciation. The depreciation which companies have been charging for a number of years has been increasingly inadequate. A debate is going on about the accounting procedures in this country to try to shift companies over to depreciating on a replacement basis rather than a historic cost basis.
I hope that I have understood my hon. Friend's figures correctly. If they were adjusted to show British companies depreciating on a replacement cost basis rather than a historic cost basis, they would show a far worse trend. To depreciate over 10 years on the basis of an investment made in 1950 gives no indication, with inflation running at 8 per cent. a year, of what a company will have to pay in 1970 when it has to replace the plant. With inflation at its present level, that is one of the major problems of the corporate sector in British industry. It is in a far more illiquid state than any of the figures demonstrate.
Nowhere is this clearer than with the nationalised industries, which also pay corporation tax if they make a profit. I remember well in my non-parliamentary days considering whether some of the docks and harbour boards were worthy of an investment. I remember looking

at the Mersey Docks and Harbour Board. I was aware, even if the poor widows and orphans of Merseyside were not, that there was no Government guarantee for the Board's borrowing. I remember working out just what the financial position of the Board, the London docks and every other dock and nationalised industry in the country would look like if they were depreciating their vast assets on a replacement cost basis. If I have misunderstood the position, perhaps my hon. Friend will correct me, but my view is that if the nationalised industries were depreciating on replacement costs, the whole basis of the return which they are required to make would have to be changed—and changed, I think, for the better.
6.15 p.m.
A strong and virile balance sheet is a very beautiful thing to behold, and I am sure that the hon. Member for Heywood and Royton would agree. Steeped in solid assets, with plenty of ploughed-back earnings and full of working capital, all geared up with athletic poise by money borrowed from widows and orphans on Merseyside and elsewhere at derisory interest rates, when compared to the rate of inflation. A good balance sheet has some breeding. Like that declining band, familiarly known as the "Tory knights of the Shires", it is reliable and eminently creditworthy at all times. But I can see no such balance sheet on the benches opposite. I am afraid that their assets tend very often to fall short of their liabilities. There would be quite a number of Vickers opposite but few I.B.Ms.

Mr. Barnett: One of the points made by the advocates of one or other of the alternative corporation tax systems is to change the look of the balance sheet with breeding in so far as it would encourage, say, 100 per cent. distribution, leaving very little for plough-back, if any. This would totally change the accounts of a company which the hon. Member considers has most wonderful breeding.

Mr. Nott: Yes, and, of course, I would favour, rather than the 1965 Finance Act type of situation—which encouraged companies to plough back all their profits—going for the opposite extreme of 100 per cent. distribution. Maybe the balance sheets would then have less breeding,


because they would look thinner, but that is not something that would worry me very much.

Mr. John Hall: They might have more breeding but less money.

Mr. Nott: Exactly. That is not an unusual situation. I only drew this rather absurd analogy to say that the profit-and-loss accounts of British industry can be made up in so many ways. It does not require a great deal of accounting expertise to show good profits for a number of years. In fact, by the time one has dealt with the inventory in particular ways and changed the basis of one's distribution from a declining balance to a straight line—all these are legal devices—and has invoiced one's goods in a particular way and done what Rolls-Royce did and capitalised research and development expenditure, one can look profitable for a given length of time even though one is making no profits.
My main point concerns the whole rate of distributed profits. I am thinking now of the 40 per cent. rate of corporation tax. I take 8s. in the £ as the standard rate as easier to calculate than 7s. 9d. I think, therefore, that the rate of fully distributed profits tax in the United Kingdom at the moment is about 64 per cent. taking 40 per cent. Corporation tax and income tax at 8s. in the £. This compares with 56 per cent. in the United States, 36 per cent. in Germany and 43 per cent. in Japan. Assuming that only half of the profits are distributed, I take an example which I quoted in Committee several years ago.
Suppose a company wishes to increase its fixed assets—its plant and machinery—by 20 per cent. a year, which admittedly is a big rate of increase, and that company has a sales-assets ratio of one-to-one. In other words, it has £100 worth of assets and £100 worth of sales. My example is not far different from that taken by my hon. Friend, but I think that it is probably the more accurate type of picture. In such an example, a United Kingdom company would need 47 per cent. net profit on its sales in order to plough back 20 per cent. into new assets every year, whereas a United States company needs to earn only 39 per cent. net profit on sales, a German company only 35 per cent. and a Japanese company only 32 per cent.

Mr. Barnett: I think that this is somewhat misleading. It does not take into account the various tax allowances. For example, in the United States, companies have only a 7 per cent. tax allowance.

Mr. Nott: I repeat my figures. A return of 47 per cent. on sales is required by a British company in order to plough back 20 per cent., compared with 39 per cent. by an American company, 35 per cent. by a German company and 32 per cent. by a Japanese company. I am meeting the point put by the hon. Gentleman. Let us say that the British company writes off its assets in five years, which is 20 per cent. a year. Let us take the 40 per cent. corporation tax and 20 per cent. of 40 per cent.—that is, 8 per cent. Therefore, if we take a 20 per cent. write off, that reduces the British figure to 41 per cent., assuming no tax allowances at all in any of the other countries.
I can quote these figures only generally. However one depreciates and whatever the tax allowances are, I suggest that the examples I am quoting are valid. I still say that a British company needs to earn far more on its sales than do German, Japanese or American companies in order to plough a comparable amount back into new plant and equipment. I am sure that that is correct.

Mr. Dykes: I am grateful to my hon. Friend for giving way again, because I know that he wants to be brief. He referred to the 64 per cent. rate roughly applicable to the full distribution situation under corporation tax. Does not he agree that there was an additional argument for the reduction of the tax because the initial changes in 1965 had brought about an increase in company taxation from 53¾ per cent. at the standard rate of 7s. 9d. to about 59 per cent. for the average company?

Mr. Nott: In 1964–65, we were on the basis, if I remember correctly, of 38¾ per cent. as the standard rate, plus 15 per cent. profits tax. That made up the 53¾ per cent. Now it is 64 per cent. on distributed profits. The conclusion which I come to from the figures of these four countries which I have quoted—although I cannot vouch for their complete accuracy, they clearly show the fundamentals of the situation—is that either a British company has to invest far less in plant and


machinery each year than does its German or Japanese or American competitor, because it is not generating sufficient after-tax profits, or it has to price its products at 22 per cent. more than the American company, 34 per cent. more than the German company or 35 per cent. more than the Japanese company in order to generate the same retentions.
I think that the evidence confirms that this is the situation because we know that we have a far lower percentage of our gross national product in investment than these other countries, and it is also the case that, where British industry competes best in overseas markets, it is not competing on price. Where British industry does fully compete with Japanese, German and American companies is where it is building custom-built products and has a particular system that it is not selling on price. That is where British industry is very competitive indeed. Where we compete, or attempt to compete, with Japanese, Italian and German companies in mass-produced goods. we are very often not competitive. This can be corrected either by tampering with the exchange rate or by increasing the amount of money which companies have to reinvest.
Supposing we were to get our rate of investment nearer to the United States level. The last figures I have—they have probably changed—show that we invested 18 per cent. of our gross national product as against 27 per cent. in Germany and 22 per cent. in Japan. Even if we got our investment up to 20 per cent., the effect would be to add substantially to the level of demand within this country. Where does that come from? We shall not be able to cut back on consumer expenditure. It has to come out of the public sector, and that brings us back to yesterday's debate.
I think that the Green Paper is excellent, and I applaud the reduction in corporation tax. But I am disappointed in the Bill in relation to one point affecting companies. I should have liked to see some recognition of the unsatisfactory position existing in British industry today with incentive schemes for executives. I make this point to my hon. Friend the Financial Secretary now, and I shall make it upstairs in Committee. At present there is no ideological barrier or conflict between the parties on this point because

the Inland Revenue is allowing all sorts of share incentive schemes, the proceeds of which are taxable as capital gains. But nothing is being done by the Government to correct the anomaly that it is only the old option schemes whose proceeds are taxed as income. All the other schemes being suggested day by day—schemes allowed by the Labour Government and which the Inland Revenue is letting by, such as partly paid shares—are taxed at capital gains tax rates. Options are, however, taxed as income.
This is an anomaly. It does not involve any ideological point between the parties. The anomaly arose out of the Finance Act, 1966, and I am sorry that it is not being put right this year, because it should be put right. In the last resort, although corporation tax reductions are vital, it is the quality of the management and the enthusiasm of the executives in these companies which count, and we all know that in American industry, and also now in French and German industry, option schemes are widespread. I think that we must provide comparable encouragement to our younger executives—I am talking of those without capital and not those with wealth—and provide them with a type of incentive arrangement similar to those which their counterparts enjoy in America and other countries.

6.30 p.m.

Mr. A. E. P. Duffy: I apologise to the Committee for not being present at the beginning of the debate. I had to attend an urgent meeting elsewhere. I share the welcome extended by the hon. Member for St. Ives (Mr. Nott) to the Green Paper on the Reform of Corporation Tax, if only because of the opportunity that it undoubtedly will give to all hon. Members for ample debate of the whole areas of corporate taxation in the months ahead. No doubt the hon. Gentleman recognises that his acknowledgment that officials of the E.E.C. Commission are now considering aligning corporate tax systems within the Community on the lines of the structure from which the Chancellor is now threatening to depart represents a very serious criticism of the Paper's contents.
I am especially sorry that I was not present to hear the remarks of my hon. Friend the Member for Heywood and


Royton (Mr. Barnett). I have noted what he had to say in the Budget debate on corporation tax and I have particularly in mind his remarks in HANSARD for 1st April at column 1171. These still seem to be the kernel of the criticisms that have been advanced against the cut in corporation tax, from the time of the Budget debate down to this week. There are still a lot of people, not merely on this side of the Committee, but within the economy who are far from convinced that, in its present state, the economy can benefit sufficiently from a 21 per cent. cut even if we allowed for the previous cut last autumn, now in force.
There is a widespread feeling that this has come too late and that the first instalment was too little to have any possible effect in the next 18 months and hence to have any effect on employment. We are now able to look at this from a slightly different standpoint from that which we enjoyed during the Budget debate. In view of the further increase in the level of unemployment we believe that nothing the Chancellor has done in respect of corporation tax will have sufficient effect to alleviate this rise in unemployment this year.
I want to offer four reasons for my pessimism. One is that, demonstrably, inflation has still not abated. Increased income, whether received by a company or an individual, is increasingly regarded in this situation in the first instance as a defence against that inflation. This is despite the claim made by the Chancellor last night and made by the party opposite on several occasions that savings are high and rising. I find this slightly depressing because I interpret in part this buoyancy of savings as a function of rising inflation.
We cannot therefore easily assume that savings will be translated into investment, because confidence has not yet been restored to a sufficient level and will not be while unemployment is increasing. Nevertheless, I freely acknowledge the changed mood of the stock market. It might soon shape up into a market poised to provide the productive capital that our economy needs. The debate a week ago was whether or not this was a bull market. This week the debate is how long this bull market will last. Some people are prepared to talk in terms of two years.
This much more hopeful business climate could easily be undermined by doubts and uncertainties arising from: (1) the Common Market negotiations; (2) industrial relations; (3) the international currency situation; (4) major industries, notably steel in both its public and private sectors; and (5) the motor industry with its predominant American influence. Moreover, because of the Government's oft-stated intention that they will leave a great deal more decision to the business community, confidence there must be a great deal more fragile. I suggest that it needed to be bolstered by a larger reduction in corporation tax. The final reason why this climate could be undermined is because of he replacement of investment grants by tax allowances and the consequential effect of that change on regional development in the short term.
Otherwise, I have an open mind on this change of policy, although I agree with the hon. Member for Cities of London and Westminster (Mr. Tugendhat) that we are entitled to look for sustainable growth. Nevertheless, I wonder whether, in the short term, this ihange did not need to be counterbalanced by a larger cut in corporation tax.
One remarkable point that can be made about a Budget that was otherwise completely in fulfilment of electoral promises is that the Government have been so timid on this matter. I recognise the force of their argument that any such reduction in present circumstances, given the present business climate, would be inflationary but both circumstances and the resultant climate are now largely of the Government's own creation, whereas on earlier and more general expression of concern about unemployment would have prompted a greater stimulation of investment and that in turn would have required a greater boldness in respect of a corporation tax cut.
The Chancellor announced his intention in his Budget speech to reform corporation tax because in his view the present system distorts the capital market and wastes investment resources. Equity capital has become more difficult to raise. The pressure for efficiency and investment profitability has thereby been reduced. These were the justifications


put forward by the Financial Secretary during the Budget debate the next day. Increased corporate retentions had led not to higher profit but to depressed conditions in the market for new issues. Retained profits had come to seem a cheap form of finance and this had inevitably tended to produce profitless operations. We know the main arguments from which the reform proposals will start and we will be looking closely at these in the next few months.
We all welcome the notice that the Chancellor has given us in this early literature which I sincerely hope will be followed by more of its kind. I especially welcome the way in which lie has invited representatives of industry, commerce and the professions concerned to indicate their views to the Board of Inland Revenue.
I am concerned about two things at this stage. One is the implications of his proposals for investment and secondly the adequacy of those proposals, especially as found in Section D relating to companies which earn profits and pay taxes overseas.
To take the first point, I recognise that the essence of any corporation tax system is that companies are taxed as separate legal entities and that a separate tax, usually income tax, is charged on shareholders and others who receive dividends and other distributions out of the company's profits. Most western industrial countries have such a system. Most of them however, as we were reminded by the hon. Member for St. Ives, stop short before the point is reached where there is a full burden of corporation tax on the company and a full burden of income tax on dividends paid out of company profits. I recognise, moreover, that there may be only one other country in Europe where the burden is greater and I understand the consequences for company liquidity and therefore investment and confidence and, subsequently, employment.
But will such changes as are proposed lead inevitably to higher investment? It seems to me that the problem which will face us and which will not be easily resolved by the kind of arguments already advanced is how to gear corporation tax to the savings-investment mechanism. I do not speak for my hon.

Friends—they can speak for themselves and I am sorry that I was not present to hear some of them earlier—but I think that hon. Members opposite will acknowledge that we are very sensitive about investment, because we see clearly, as they do of course, its implications for employment. Many of us will be focussing our attention in the debates in the months to come on this part of the proposals and we shall need a great deal of convincing that the Chancellor's proposals for reform will inevitably mean higher investment.
My second worry is already recognised on page 2 of the Green Paper which says:
A decision on the system to be adopted will be taken in the light of the comments and discussion which this paper seeks to encourage and of developments in company taxation within the European Economic Community".
I apologise if that point has already been made this evening. As I said earlier, to the best of my belief the officials of the Commission are now interested in aligning all corporation tax systems within the Community on the basis of the very structure in Britain from which the Chancellor now wishes to depart. I therefore hope that any changes which he finally undertakes in the corporation tax structure will be fully compatible with the Common Market and our overseas commitments.

Mr. Maurice Macmillan: I understand, Mr. Murton, that this is the first time that you have taken the Chair in the Chamber. I do not know the appropriate form of words, but I should like to express our pleasure, which I am sure is shared on both sides of the Committee, at seeing you there. Perhaps I ought to hope that none of us incurs your displeasure.
My hon. Friend the Member for Horsham (Mr. Hordern) suggested that hon. Members opposite were trying to make bricks without straw. In some senses, the debate has reminded me of that old story of the examinee who was asked to give a list of the major and minor prophets in the Old Testament! Not having mugged up that part of his work, he said, "Far be it from me to distinguish between such holy men, but here is a list of the Kings of Judah."
Far be it from anyone to say that the rate of corporation tax should not have


been reduced, but there were many other things which were a great deal better and many other things which in their way would have been a great deal better for doing what it is alleged a corporation tax cut should do. That more or less sums up the totality of the criticism of hon. Members opposite. They asked, "What about money supply: what about selective employment tax; what about investment grants?".
I hope in this connection that the hon. Member for Ashton-under-Lyne (Mr. Sheldon) will forgive me if I say that his comment that this was the wrong time to do away with investment grants when industry was in such a terrible state was in itself a criticism of his own Government's policy, for only that Government could have been responsible for whatever state industry was in at the time we decided to do away with investment grants; but that is a relatively minor point.
6.45 p.m.
Much of the criticism of the Government has been that they have not yet reversed the trend of the past six years or so, and have not yet undone the damage by the previous Administration and, finally, that the Budget measures have not yet operated, although everyone admitted that they had not yet had time to operate because of the nature of our system. There was a certain contradictoriness in the points of view expressed by hon. Members opposite which I shall try to isolate as I come to them.
I was a little worried by the evidence that some of the things which the Labour Government did hon. Members opposite would do again. The Budget will have the effect of increasing demand and raising from 2 per cent. to 3 per cent. the growth in total productive potential. I hope that the hon. Member for Heywood and Royton (Mr. Barnett) does not think that by "productive potential" we mean the best that the country is capable of, and that he understands that we mean it in its rather more technical sense as being the rate of growth which we can hope to achieve at the moment without producing over-heating. He implied that we thought of 3 per cent. as a constant possible growth in the productive

potential, but I assure him that we do not imply that it will always be so.

Mr. Barnett: I am delighted to hear it. Perhaps the right hon. Gentleman will tell us what figure he has in mind.

Mr. Macmillan: The greater figure which we shall succeed in due course in achieving. We have set a target of 3 per cent., a far greater rate of production than hon. Members opposite ever succeeded in getting anywhere near in their six years of Government. It is not up to them to complain that in 11 months we have not yet achieved what they failed to achieve in six years, or that we have not yet succeeded in undoing the damage which they did.
The hon. Member for Heywood and Royton went rather further and implied that we should have had a considerably greater reflation. So did the hon. Member for Ashton-under-Lyne and the hon. Member for Loughborough (Mr. Cronin). I was very concerned about this. It showed an almost Bourbon capacity to avoid learning from experience. If that policy were followed, it would seem to have all the seeds of disaster which led to the events of 1967. It also showed a considerable change in the attitude of hon. Members opposite since they were in office.
In office their methods of creating investment were very largely those of subsidies and creating capacity in industry to invest. Seldom or never was it argued that it was necessary to increase profits and demand in order to increase investment. Now they have come round completely to the argument that the most effective way in which to increase investment is by increasing consumer demand. They suggest that my right hon. Friend should have increased it more, regardless of the dangers to the balance of payments of which the hon. Member for Heywood and Royton made light, or the domestic inflationary situation.
Both the hon. Member for Loughborough and the hon. Member for Heywood and Royton showed a touching faith in the willingness of companies and those who run them to go on making profits at a higher and higher rate in order to pay an ever-increasing rate of corporate taxation, and they also show a touching faith in their capacity to do so. Indeed, the hon. Member for Loughborough showed


a touching faith in the willingness of the directors of companies to contribute to Tory Party funds in return for measures which he himself described as ineffective.
The answer to hon. Members opposite was given by my hon. Friend the Member for Horsham and my hon. Friend the Member for Wycombe (Mr. John Hall) when they pointed out that the need of companies was for a proper return on capital to enable them to make a reasonable return which took into account the cost of borrowing, and that it was the totality of the Budget measures rather than the corporation tax cut alone which would effect that, but that that did not mean that one should underrate the value of this reduction in corporation tax as an important part of the measures. Combining incentives to invest with the capacity to do so is the most one can do by fiscal and monetary methods to help industry. I do not think that any change in the structure of corporation tax can be said inevitably to lead to more investment. It can make it easier or harder, or more or less likely. It can facilitate it in different companies. But it cannot be said that changes in the structure of any tax will inevitably lead to more investment.
No claim has been made that by itself this reduction in corporation tax is enough. Incidentally, I agree with what my hon. Friend the Member for Wycombe said about unemployment. The reduction in corporation tax may not be enough, but it is all that is proposed in the Clause and all I am proposing this evening. Corporate incentives cover a wider field. I notice a slight difference in emphasis, according to whether people think in terms of small or large companies, great public corporations, or the smaller closed companies.
My hon. Friend the Member for the Cities of London and Westminster (Mr. Tugendhat) pointed out, reasonably, that in larger companies the seeking of profit was probably a secondary motive to the seeking of a larger share of the market in order to widen their capacity to sell and increase the opportunity for increasing turnover. My hon. Friend would probably admit that for some of the smaller companies and perhaps the closed companies the need to make a profit is paramount if they are to con-

tinue to finance their expansion and provide working capital out of retained profits which is, in this type of organisation, one of the main sources of investing.
My right hon. and hon. Friends have emphasised that confidence is one of the major factors involved and that it is the help which we have given in respect of retained profits and to attract equity investment which is the important factor.

Mr. Dalyell: The effect on multinational companies of the cut in corporation tax has been raised. It is a quite important point.

Mr. Macmillan: The treatment of international companies is likely to be affected by some of the proposals in the Green Paper.
The hon. Member for West Lothian (Mr. Dalyell) asked me to expand on the question of greater fairness as between companies and greater incentives to adopt a better economic policy which the changes are likely to bring about. I do not wish to go into great detail on this matter, particularly as my hon. Friend the Member for St. Ives (Mr. Nott) gave a disquisition on the possibilities of a change in corporation tax which has almost done my work for me. But the effect that the proposed changes will make to corporation tax is neutral as between retained and distributed profits, but there are some suggested consequential adjustments in respect of closed companies which might otherwise be adversely affected. This seems to be fairer to foreign income and to do more to create a stable and continuing capital market.
I hope that hon. Members will forgive me if I do not go into more detail on that matter. We shall have ample opportunity to discuss it in the months ahead. I also hope that the hon. Member for Sheffield, Attercliffe (Mr. Duffy) will forgive me if, for the same reason, I do not go in great detail into the points he raised. I am only sorry that the membership of the Standing Committee will not be larger so that it can comprise all the Members who have spoken this evening.
I should like to say a few words on the question of the harmonisation of the European Economic Community. It is fair to say that harmonisation, in the sense that the structure, rates, allowances, and so on, are brought together, will be a


very long job. The formal process within the Community will be long. The problem for the more immediate future is likely to be the attempt progressively to eliminate the important ways in which the different company tax structures and administrative practices distort the free flow of capital—in other words, making a more ad hoc judgment about removing anomalies without necessarily fully harmonising the tax structures.
It is true that the Commission has before it Dr. Van den Tempel's report which favours a classical system of company taxation. But it has not yet made any formal proposals to the member countries. It must be borne in mind that a classical system would not be compatible with the tax systems as they exist or seem likely to develop in France and Germany. Therefore, there are problems of adjustment there as well as for ourselves.
On the other hand, the French imputation system can be said with confidence to be compatible in its practical effects with either the two-rate system or the imputation system described in the Green Paper. I hope that that is some reassurance to hon. Members. I should not like to go further because these matters are open to negotiation in the Community and as between ourselves and the Community, whether we are members of it or not.
I hope that my hon. Friend the Member for St. Ives will forgive me if I do not try to distinguish between what I might call his search for beef and for breeding in balance sheets. I was not sure which he was going for. I hope that he will raise that point when we debate these matters in more detail. My hon. Friend answered some of the points raised by the hon. Member for West Lothian and made some interesting suggestions, as did the hon. Member for Attercliffe. I should like to study in greater detail what was said. One of the unfortunate facts about this type of debate is that it ranges over so many topics that it is difficult to pay as close attention to the interesting points made as one would like.
The other topic to which reference has been made—rather curiously in some ways—is money supply. I say "curiously" because my hon. Friends

demonstrated very clearly that it has no relevance to the effect of corporation tax on liquidity. My hon. Friend the Member for Horsham made it plain that he was referring to the effect of corporation tax on company liquidity and the shortage of money in companies rather than the supply of money in general. He said that the situation was partly due to the Labour Party in a previous incarnation. My hon. Friend the Member for Basingstoke (Mr. David Mitchell) made the point clear when he referred to the need for tight money and lower tax, making profits harder to earn, but more worth having.
The factor which emerged from the debate, however wide it ranged and however great its diffuseness, was the enormous importance of measures designed to improve, not only the quantity, but the quality of investment. It is fair to say tint the Committee, divided as it might be on the methods best suited to achieve this object, was wholly united on the need for its achievement. It is perhaps unfortunate that there is evidence from the Continent and other parts of the world that at this moment investment in, for example, the machine tool trade is tending to fall in those areas as well as in this country. This is not an easy time for some of the more cyclical trades of that sort. This only enhances the importance of the point made on both sides of the Committee as to the need to expand the rate of investment, to improve its quality, and to achieve a stable rate of growth and a stable increase of employment.

Question put and agreed to.

Clause 8 ordered to stand part of the Bill.

Clause 10

PARENT AND CHILD—REPEAL OF AGGRE GATION PROVISIONS, AND AMEND MENT OF SETTLEMENT PROVISIONS

7.0 p.m.

Mr. Barnett: I beg to move Amendment No. 6, in page 10, line 12, leave out paragraph (a).

The Temporary Chairman (Mr. Murton): With this Amendment, I think that it would be for the convenience


of the Committee to consider Amendment No. 7, in page 10, line 24, leave out paragraph (a).

Mr. Barnett: That would be agreeable to us, Mr. Murton. May I add my congratulations to you on your "maiden chairmanship", if that is the correct phrase. I hope that you enjoy our Finance Bill Committee deliberations as much as we have over the years.
Clause 10 demonstrates the fundamental difference between the two sides of the Committee on taxation methods. The attitude on this side of the Committee is one of equity, fairness and social justice, whereas the attitude on the other side involves the desire positively to assist those who wish to avoid taxation. [HON. MEMBERS: "Oh."] Well, I hope to prove this as I go along.
The 1968 Act, which this provision is to repeal, eliminated a gross unfairness between the mass of taxpayers on the one hand and a small number of taxpayers on the other hand, to whom it was open to use this particular method of avoiding taxation. The principle is that of the family unit, and it involves the concept that two identical families, with the same income, should not be taxed differently simply because, in one case, the income accrues to one member and, in the other, it is divided among a number of members of that family—and artificially at that.
In practice, we all know what this principle means. The wealthy grandfather effectively gives to his son via his grandson. This is what it is all about. I have no wish to prevent a grandfather making gifts to his son, or his grandson, or his daughter, or his granddaughter. On reflection, since I have a student daughter, it might be very useful to have a provision so that I might be prevented from making gifts to her, but that is not what I am attempting to prove here. I have no wish to prevent that sort of gift. All I am saying is that there is no reason that that gift should be allowable for any form of tax relief. This is what the Clause will do.
I have no obsession with tax avoidance. I do not wish to hound those seeking to pay the least possible amount of tax. That would be chasing my own tail. To

adopt a famous dictum, a judge once said that it was no part of a taxpayer's duty to put the largest possible shovel of the Inland Revenue into his income. Equally, it is not part of our purpose—or should not be the purpose of this Committee—so to frame our tax laws to allow the largest possible shovel to be put in to relieve taxation for a small number of taxpayers at the expense of the great majority of the rest. This is the major principle which is involved here.
To obtain this particular form of relief one does not take out a life policy or seek to claim for a dependent relative. What one needs is expert advice on this method of tax avoidance. Therefore, it distorts the intention behind a fair tax system.
The main case made in our debates on 15th May, 1968—which I recall very well indeed—involved the anomalies created by seeking to pursue this sort of device. Some serious points were made in a moving speech by the late Iain Macleod. Those who were present will recall his excellent speech, when he talked about what might be described as families who had suffered a calamity. He mentioned a very serious point involving a thalidomide child who would suffer for the rest of his life, and that particular concession was made in the 1968 Act. When such a calamity occurs, the compensation goes to the parent and is rightly subject to aggregation.
The main anomaly the late Iain Macleod was putting to the Committee at that time was met, but even the examples he puts emphasise the difference between the two sides. He gave one example in which he instanced the sad death of a father, as the result of which the widow received £12,000 in compensation. He pointed to the difficulty that she might not being able to send her three children to Epsom College.

Mr. Kenneth Lewis: The situation was not quite so simple. The difficulty was that the widow might not be able to continue to keep the children at Epsom College, which is a quite different matter.

Mr. Barnett: I hope the hon. Gentleman will follow my argument. The point I was making was that the particular case put by Iain Macleod was that in


any case the children were at that time too young for school. The difference in the tax involved was some £200 or £300 and the upshot was that it would not be possible for her to send the children to college. That was the point the constituent was making in a letter to her Member of Parliament. However, we on this side of the Committee know of many worse cases involving parents who cannot even afford to pay for school meals for their children in primary schools, let alone to afford to send them to Epsom College. The fundamental difference between us is that hon. Gentlemen opposite consider it a serious anomaly that the tax system does not assist a parent to send his child to that sort of school.
These examples emphasise that the Conservative Party constantly seeks to make a case for tax avoidance. On that earlier occasion we were told about trusts and settlements being "caught" by the 1968 Act. Why not? Trusts are mainly set up for the purpose of digging a great hole in the estate duty Acts and in income tax and surtax legislation. There are, of course, other reasons why trusts are set up. There is no reason why people should not be able to continue to set up trusts if they wish to protect their beneficiaries to whom they intend to leave money, but why on earth should they also get tax relief? Why should we devise a tax system to enable them to get that sort of tax relief? There is no reason at all.
We then had other examples involving divorce, separation and maintenance claims. As the then Chief Secretary to the Treasury, now Lord Diamond, said at the time, the majority of these cases are settled in the magistrates' courts—indeed, five times the number as are settled elsewhere. In the great majority of cases, maintenance allowance is given to the wife. The only cases in which anomalies are created are those in which, in the higher courts, the two sides get together to obtain the maximum assistance from the tax system by giving some of the allowances to the children. Once more, this is what the Clause will now do. It will assist further tax avoidance.
But then we had cases presented to that Committee which were quite typical of the sort of examples I have in mind.

They were presented very amusingly, as I am sure that hon. Members who were present at the time will recall, by a Member who was well loved in the House—he was not here all that long and we were all very sorry about that—John Smith, the then Member for the Cities of London and Westminster. He made a most remarkable contribution to the Committee. He set out some of the examples of the suffering there would be to people through the Clause of the 1968 Act, and he was most amusing because he spoke first of all, he said, about someone whom he knew best of all, namely himself. He said:
I have five children and they, it so happens, are better off than I am…"—
apparently he was a modest surtax payer—
…because I have always earned a certain amount and my children's relations have always thought it more sensible to leave money to them, in case the breadwinner should be removed, rather than to leave it to me. To me they have always left the liabilities.
He went on to say that he also had some land:
I have some farms and some woodland where I do not live—just a patch of England which was left to me.
It was wonderful. It was brilliantly done. Apparently the Clause would hurt him very severely.

The Financial Secretary to the Treasury (Mr. Patrick Jenkin): With respect, from the very column from which the hon. Gentleman is quoting, I quote as follows:
The Clause will have unexpected effects. It offers me considerable advantages.

Mr. Barnett: Also considerable disadvantages, which he did not mention, because the income of five children would be aggregated with his and he would be paying a considerable increased amount of tax. He forgot to mention that. However, I will come to other examples he quoted.

Mr. John Hall: What Mr. John Smith endeavoured to point out was that because of the operation of that particular Clause in the then Finance Bill, the improvements that he had in mind to carry out for the benefit of his children would not be carried out because to do so would be to penalise them. He was arguing that the Clause was preventing the improvement and the better use of land.

Mr. Barnett: I am taking this to be a typical example, because the type of cases presented to that Committee—apart from the compassionate cases referred to by the late Iain Macleod, which were met—[HON. MEMBERS: "Oh.]—yes, they were largely met—apart from generalisations by some hon. Members of the Committee, the only specific cases were of the type we had from John Smith.

7.15 p.m.

Mr. John Hall: I do not wish to keep interrupting the hon. Gentleman but as he has mentioned the case brought up by the late lain Macleod, and he mentioned specifically the letter he read from the widow who had had a fund of £12,000 set up, the hon. Gentleman has not pointed out that this fund was established by the previous husband's employers in order that the children should have the education that they would have had had the husband continued to live, and it was set up before the 1968 Act to give them that education. The widow then found that because of the operation of the Clause she was unable to do what her late husband would have been able to do.

Mr. Barnett: I am not denying that point. But the old law used the tax system to enable that to happen. That is the only point I was making.
To return to the other example, it was very well put and again was a typical case. I suppose that one could describe it as two people of Mr. Smith's acquaintance and, he thought, possibly the acquaintance of the then Chancellor, who both had substantial incomes:
They were married, and their marriage broke up. It was clearly the husband's fault; he marched off with some beautiful creature leaving the wife and children and everything else. He marched off, and now he is a nonresident, living in Majorca. His wife is a resident of this country, has a house in this country, and has custody of the children, who also have large incomes. But she lives in Paris.
This is not the sort of typical case that we on this side of the House have amongst our constituents. I venture to suggest that it is not exactly typical of constituents of any of the hon. Members that I see opposite. I cannot at present see the hon. Member for Cities of London and Westminster (Mr. Tugendhat), who now occupies the seat of John Smith. It

is possible that all people living in the City of Westminster are of this type—although I live there, so it is not strictly true.

Mr. Sheldon: My hon. Friend is the exception.

Dr. Alan Glyn: The hon. Gentleman says that some people do not represent such constituents. I remind him that Mr. John Smith is now a constituent of mine.

Mr. Barnett: I am delighted to hear it. We all liked him. He then continued with another example of settlements. He said that he wished
…to mention the case of a nobleman, who had an American mother. He is reasonably well off, but his children have a large American income. It will pay him handsomely to educate his children in Switzerland so that they are non-residents of this country and their income goes straight to Switzerland."—[OFFICIAL REPORT, Standing Committee A, 15th May 1968; c. 900, 903, 904.]
It is perfectly true that that may well have been the case. But if these are the reasons and arguments advanced as to why we should have this form of tax avoidance, it is a very weak case for creating a tax system which allows taxpayers to dig that sort of hole in it to enable them to avoid taxation at the expense of the majority of other taxpayers.
We then have the general case about the public schools. To my surprise, I confess, it appears that my right hon. Friend the then Chief Secretary had not realised the devastating effect that the 1968 Act, and this particular Clause, would have on public schools. When he heard, as he was told constantly throughout the Committee stage, that, for example, a widow had to take her children away from a public school because the grandfather was no longer able to continue paying, he said that that was not what he was thinking of anyway.
I repeat, I have no objection to a grandfather paying for his grandchildren's schooling. What I object to is that the rest of the taxpayers should be paying for his grandchildren's schooling. I do not blame him for using the system. I blame hon. Gentlemen opposite for reintroducing that system and perpetuating the distortion. If the argument is that grandfathers who help to send grandchildren


to public schools save the State money, the Government should be perfectly honest and give a straight subsidy to allow them to go to those schools. The Government should not distort the tax system to do so.
My case is not about public schools. I happen to believe that parents should not be able to buy what they consider to be privilege. But I do not want to stop that through the tax system. What I do not want to do is to allow parents to use the tax system to buy what they believe to be a privilege through sending grandchildren, and, in effect, assisting their children to send children, to public schools. While the public school system is available, at least we should not have a tax system whereby all the rest of us subsidise those who send their children and grandchildren to those schools.
My conclusion is that clearly the Clause is a movement away from equity, not just to a passive tax system but to a system of positive encouragement of the avoidance of taxation. The Clause is a tax avoider's charter, and I hope that we shall all vote against it tonight.

[Miss HARVIE ANDERSON in the Chair.]

Mr. Kenneth Baker (St. Marylebone): When the late Iain Macleod moved the Amendments tabled by this side in Committee in 1968, he said that Clause 15 of the 1968 Bill, which introduced the aggregation of children's investment income, was possibly the most important Clause in the Bill.
The hon. Member for Heywood and Royton (Mr. Barnett) has underestimated the number and types of family caught by this provision. He implied that the great majority of cases involved families where grandparents wanted to pay for their grandchildren's education, and they used the device of by-passing their parents. But, as was pointed out in Committee three years ago, there were all sorts of anomaly, to which the hon. Gentleman referred again tonight and skated over rather smoothly.
The hon. Gentleman will remember that in the three or four long days in Committee just before the Guillotine fell in 1968, the Government side, led by Jack Diamond, did not accept a single one of

our Amendments. In Committee, they did not even accept the case for the thalidomide child or the physically handicapped child. In fact, in Committee the hon. Member for Heywood and Royton, the hon. and learned Member for Lincoln (Mr. Taverne) and the hon. Member for Woolwich, West (Mr. Hamling) all voted against our Amendment which was designed to help thalidomide children.
Many other hardship cases have been caught in the last two or three years—

Mr. Dick Taverne: Will the hon. Gentleman accept this correction? It was made clear by Lord Diamond that he would himself move an Amendment on this matter, and he did.

Mr. Baker: With respect to the hon. and learned Gentleman, we were prepared, and fain Macleod offered, to have a separate vote on what was called "little (c)", which was the paragraph concerned with thalidomide children. That was rejected, and we were given no worthwhile undertaking. It was only the late conversion of the Government to our ideas that saved the day.
Many other anomalies were not covered by the then Government. We had in mind the sort of family where the breadwinner is killed in an accident and the compensation or insurance funds resulting from the death are invested, with the money from the investment not being given to the wife but to the children. I know of cases in my constituency where this has happened, and it is a rather more common feature than the hon. Member for Heywood and Royton thinks. That sort of case is not excluded and was covered by Clause 15 of the 1968 Bill. Similarly, children who receive incomes as a result of court settlements are included. They are by no means the small number referred to by the hon. Gentleman. Those were the cases that were not met by the legislation, and I am pleased that the Government are repealing it in their first Budget.
I am surprised that the Liberal Party has decided to join the Opposition. As I understand it, the effect of the Amendment in the name of the hon. Member for Cornwall, North (Mr. Pardoe) is to eliminate the whole of Clause 10, which lines up the Liberal Party with the Labour


Party on this matter. In 1968, the Liberal spokesman was not so aligned. Dick Wainwright made some very eloquent speeches supporting my right hon. and han. Friends and the arguments that we put forward. So, if there has been a change of heart on the part of the Liberal Party, I shall be pleased to know the reasons. In economic matters, the Liberal Party misses Dick Wainwright.

Mr. John Pardoe: I am not sure to whom the hon. Gentleman is referring when he speaks of Dick Wainwright. I have never heard of anyone of that name. Mr. Richard Wainwright has never been called "Dick" by even his closest friends, of whom the hon. Gentleman was not one.

Mr. Baker: He was called "Dick". I would never describe myself as one of his closest friends, but he was known to us as "Dick". He certainly supported us in Committee, and I should like to know whether the Liberal Party has changed its views, and, if it has, why it has.
The investment income covered by this Clause is wider than that referred to by the hon. Member for Heywood and Royton. This is not a point that I make. It was made by the hon. Member for Birmingham, All Saints (Mr. Brian Walden) in Committee.
The yield of aggregating children's investment income with that of their parents was about £25 million, and it emerged during the course of the debate in 1968 that about half, £12½ million, came from the first children's allowance of £115 being disallowed. This is somewhat technical, but it means that part of the yield of the Clause came from people whose parents were not remotely in the surtax class, and this point was made repeatedly in Committee.
The hon. Member for Heywood and Royton said that the basic principle behind their Clause was tax equity, that it is the family spending unit which must be taxed. This was an ingenious device almost invented, but not quite, by John Diamond—"Jack" to his friends. The family spending unit was to include only the mother, the father and the children. It did not include, for instance, any grandparent living with the family, or uncles or cousins who were dependants of the family. That obviously makes

nonsense of the argument that there is equity in this. Why should a family spending unit consist just of parents and children? Why not include other dependent relatives? Why is not their income added? Why is not the income of possibly an elderly aunt or a grandparent added in and aggregated? That was the first basic anomaly in the Labour Government's case.
The second anomaly was the distinction in the family spending unit between earned and unearned income. If the income were unearned, it was aggregated. If it were earned income, it was not aggregated. The only principle, as Iain Macleod pointed out, was that earned income is sacred and unearned income is profane. That was the only distinction made by the then Government.
There is nothing meritorious or viable in the principle of the aggregation of income. The only incomes to be aggregated since the beginning of the income tax system are those of husbands and wives, and I am glad that the Government have decided to do away with that system in their first Budget. It seems to me that each individual should be treated as an earner or recipient of income in his or her own right.
I do not believe that there is any principle in the Opposition's case in opposing the Clause. The mantle of Lord Diamond has fallen upon the hon. Member for Heywood and Royton. Just as Lord Diamond was put up in 1968 to try to justify confiscation in the garb of social justice, so has the hon. Member for Heywood and Royton been today. That in fact is what it was, and it was seen to be that. Probably two-thirds of the yield of the Clause came from people who were not in the surtax class at all. I hope that my hon. Friend the Financial Secretary will be able to confirm that.
This reform will not take effect until 1972–73. I should like to know why. I do not see why it cannot be introduced in 1971–72. However, I congratulate the Government on taking this step. One of our pledges in 1968 was that we would repeal this provision, because it was so grossly unfair. It hit many families at a time when they had been hit by the loss of the breadwinner or some other misfortune. I am pleased that the Government have decided to deal with the matter in this way in their first Budget.

7.30 p.m.

Mr. Denzil Davies: The hon. Member for St. Marylebone (Mr. Kenneth Baker) has alluded to one of the arguments which we occasionally hear in favour of disaggregating this income—namely, that disaggregation accords with some major principle of taxation in that one should never, or hardly ever, treat the family as one taxable unit. I submit that there is no such principle in income tax legislation.
The hon. Gentleman mentioned one instance where the income of an infant is aggregated with that of his parent where the parent is the settlor of the infant's settlement. That is a major exception to any principle of this kind which may exist.
Even this Government have not carried their theories to the extreme by proposing that the unearned income of a wife should be treated separately from the income of her husband. So there is no clear principle to the extent that there should not be any aggregation relating to a family unit. If such a principle existed, I submit that it would not cover the present situation.
We are not concerned, as hon. Gentlemen seem to suggest, with income which the infant receives; we are concerned with income which hardly ever finds its way into the hands of the infant. The total amount of taxation raised by the aggregation provisions amounted to about £15 million. The income might even be £20 million to £30 million. That kind of income does not find its way into the hands of infants. Indeed, only a small proportion gets into the hands of infants. Most of it is applied for the benefit of the infant, and often by trustees under the strict and specific provisions of a deed of covenant or a trust instrument.
We are not talking about the spendable income of an infant, but income applied for the infant's benefit. Not only does the infant rarely see most of the income or have control over its application, but often the person who has control over its application is the infant's father acting in his capacity as a kind of family trustee. He decides how the income is to be spent within the terms of the trust; he decides what is for the infant's benefit. In most cases the infant is never consulted.
If we suppose that the bulk of the income which is aggregated in the present provisions is spendable income of the infant to do with what he likes, then we ignore the reality of the situation. This is the income of the family. In most cases it is applied not only for the benefit of the child, but for the direct benefit of the whole family. Since this is the income of the family it is therefore right and equitable that it should be taxed as the income of the parents.
No one supposes that the real reason that Clause 10 is introduced is because of certain anomalies relating to compensation payments or cases where unfortunately a parent may die and payments are made in settlement to an infant; nor is the real reason some metaphysical misgivings by the Government about taxing the income of one person as the income of another. The real reason, as hon. Members on this side know, is simpler and cruder. We know that if the Clause becomes law most of the unearned income which will be freed from aggregation will again find its way into the bursaries of the public schools. With a wealthy grandfather as a bountiful settlor, with a father as a convenient trustee, and an unconsulted infant, the way will again be open for those cosy little family arrangements whereby a child can be expensively educated with the minimum expense to his parents. If the law introduced by my right hon. Friend is not to be changed, it may prove impossible, in these inflationary times, to pay the school fees and little Johnny might have to go to the local secondary modern school and then stand on his own feet.
Prior to the election a solemn and binding covenant was made between the Tory Party and its rich supporters that the £15 million a year tax arising from these aggregation provisions would be returned to them. We are told that the party opposite always keeps its election promises. It certainly keeps those promises which it makes to the rich. It is not so particular about promises relating to the reduction of prices or the reduction of unemployment—[An HON. MEMBER: "Or family allowances."]—or family allowances—because the rich, in the main, are well insulated against both those evils.
If a promise to return the £15 million had not been made, I suggest that Lord Carrington would have returned a little less laden from his pre-electoral perambulations in the City and the board rooms of this country. It would not have benefited the party opposite much if the prospectus which the noble Lord was hawking around the City had failed to contain a clause to that effect. It would not have been much use if the prospectus stated that the £15 million would be aggregated with the miserly £8 million which the Government are proposing to give under the family income supplement provisions.
The number of subscribers to that prospectus would have been small and the subscriptions would also have been small if it had contained a clause to the effect that the £15 million was to be used to see that no infant was to be denied free school milk or to go without a proper school dinner. After all, those who subscribe to the party opposite do not invest their money on the basis of such worthless and irrelevant consideration. I suggest that many company directors or chairmen were enthusiastically prepared to dig deep into the pockets of their shareholders at the thought that, with the return of a Conservative Government, the burden of school fees might again be lifted from their shoulders.
Hon. Gentlemen opposite never tire of proclaiming, especially at election time, that whereas they do not naturally believe in equality, they believe in equality of opportunity, although they never explain how it is possible to achieve one without the other. If hon. Gentlemen are sincere in these pronouncements about equality of opportunity let them show their sincerity by voting against a Clause the main effect of which will be to preserve the existing inequalities of opportunity in our society. Let them insist that the sums raised in taxation as a result of the aggregation provisions be used to reduce the gap between the facilities provided for those educated privately and for those educated under the State system.
If hon. Gentlemen do not have the courage to act in that way, if they do not have the courage to insist upon this, I suggest that they are demonstrating yet again that all their pronouncements about

inequality and equality of opportunity are merely electoral slogans, that the Tory Party is still the party of the privileged and the wealthy, and that all those pious protestations of Tory Prime Ministers about the need to create one nation are not only devoid of originality, but, far worse, are totally devoid of sincerity.

Mr. David Waddington: I am disappointed, but not surprised, that so early in this debate about a taxation change we have heard an attack on the public school system, and an attack on the right of parents to arrange their affairs so as to enable them to send their children to public schools. It is an illustration of how far values have been distorted by the antics of hon. Gentlemen opposite over recent years that, when statements of that sort are made, they are not greeted by gales of derisive laughter, because it is a shocking affair that time after time attacks like that are made by hon. Gentlemen opposite, who really seem to believe that it is grossly anti-social for parents to wish to educate their children at their expense, and yet there is nothing anti-social—

Mr. Alexander W. Lyon: rose—

Mr. Waddington: I shall give way in a moment. As I was saying, hon. Gentlemen opposite think that it is grossly antisocial for parents to wish to educate their children at their own expense, but that there is nothing anti-social in the same people squandering all the family savings on expensive holidays abroad. I should have thought that the family that preferred to see its children educated properly was acting very much more responsibly, and it is grossly unfair, and shows a strange set of values, to describe families who behave in that manner as antisocial, rather than being aware of their responsibilities.
To come to the whole question of the aggregation of children's incomes with the incomes of their parents, it is worth going back to the Budget Statement in 1968, when the then Chancellor of the Exchequer said:
Our tax system has always treated the income of husband and wife as one, on the basis that they are a single spending unit. Logically the unit for tax purposes ought to include children as well as husband and wife, for the children's income, just as much as the parents', is available for the family and is


reflected in its living standards."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 292.]
That was the justification put forward by the then Chancellor for changing the law, and in fact it was the only justification that he put forward for the change.
As one of my hon. Friends said, if that argument has any validity at all, it is as much an argument for aggregating earned income as for aggregating unearned income. A husband's and wife's earned incomes are aggregated, and if the unit should include children then, logically, the children's earned income ought to be aggregated. But, if the Chancellor had aggregated children's earned income, there would have been the devil of an outcry from hon. Gentlemen opposite, and rightly so. It is impossible to find any logic whatsoever in the then Chancellor's expressed reason for bringing in this change in the 1968 Budget.
I detest the term "unearned income", and I regret that it has not been possible, in this Budget, to abolish entirely the distinction between earned and what is now called investment income. As has been said on many occasions, but it needs saying again because hon. Gentlemen opposite seem to be blithely unaware of it, the source of investment income has always been severely taxed in one way or another, either through income tax or capital gains tax if it has been earned and saved, or through estate duty if it has been inherited.
The Government would have been wrong if they had allowed this offending Section of the 1968 Act to stand, and allowed yet another form of discrimination against investment income to become a permanency in our tax system. We know only too well that when these changes are made they become part of the law of the land. They remain part of the law of the land for a year or two, and then become holy writ, and nobody then thinks that it is possible to go back to the situation that existed before the change was made.
7.45 p.m.
I think that there is great significance in the fact that the Opposition are not seeking to delete subsection (1)(b). They could hardly suggest that now that the

age of majority has been lowered to 18 there is still a case for treating the income of a person over 18 as the income of his parents, for to do so would be to fly in the face of the recommendations of the Latey Report, and the Family Law Reform Act which provides that for all other purposes infancy ceases at the age of 18.
I shall be interested to hear the views of the Members of the Liberal Party, because I understand that they have put down an Amendment, the effect of which would be to delete the whole Clause. It shows how much thought Members of the Liberal Party have given to this matter, when they are stupid enough to put down an Amendment which would have the effect of aggregating the income of a child with the income of his parents when that child was over the age of majority if the income of the child came from a trust set up by his parents, yet apparently that is the attitude of the Liberal Party to this all-important Clause, provided, of course, that they realised what they were doing when they put down an Amendment to delete the whole Clause.
Members of the Labour Party have nothing to be proud of because, in their last Budget, and after the Family Law Reform Act had become law, they refused to put right an obvious injustice. It does not say much for their protestations that they are on the side of equity today that, after the Family Law Reform Act had become the law of the land, and after the Latey Report had recommended that infancy should cease at 18, for fiscal purposes as well as for all other purposes, and bearing in mind that they are always telling us that they are in pursuit of equity, that they went out of their way to say that although a child ceased to be an infant for all other purposes at the age of 18, they jolly well were not going to have children ceasing to be children at 18 for fiscal purposes, and they aggregated the income of the child with that of his parents. I therefore find it difficult to accept what they say when they talk about equity. We did not see much equity when they were in office.

Mr. Alexander W. Lyon: The hon. Gentleman is making a false point. The question of children attaining the age of 18, and therefore being adults for


all purposes is wrong, because, in relation to scholarship income, and in relation to maintenance grants at universities, they are frequently treated as infants until they reach the age of 25, in the sense that, even though married, they are not treated as being fully adult. They are still treated as being dependent upon their parents.

Mr. Waddington: I am sure that the hon. Gentleman has read the Latey Report and knows that it was a unanimous recommendation that, for fiscal purposes, infancy should end at 18. That is my point. All I am saying is that hon. Gentlemen opposite, who talk about equity, went out of their way to fly in the face of the recommendations of the Latey Report and, in order to follow this so-called principle of the family unit, were prepared to say that it was right for a child to cease to be a child at 18 for all purposes, but not for fiscal purposes. That is the point that I am making.

Mr. Norman Buchan: It is not very frequently that I intervene in debates on the Finance Bill, but today I have been strongly tempted to take part, and, after hearing the speeches of hon. Gentlemen opposite, I am even more tempted to do so.
I am reminded that the last speaker represents Nelson and Colne. We have fond memories of a former Member for that constituency, who fought for equity and equality of opportunity all his life. I do not know what he would have made of the hon. and learned Gentleman's speech. I sometimes think that hon. Gentlemen opposite carry a kind of psychological miasma of devotion to their old school, which passes all understanding. We can touch on all sorts of things on this side, but once it impinges on the public school, their hackles rise. It is extraordinary. It goes even further than their devotion to their marital status. They are more anxious about what might happen to the public schools than about the problem of aggregation or disaggregation between husband and wife. It is on this kind of basis that the arguments about equality and opportunity are put forward.
The hon. Member said that we are worried because people might wish to educate their children at their own

expense. With respect, this is not the problem. We object to hon. Members opposite, and the people who helped to finance their political campaign, and the people to whom their promises were given in the election prospectus, financing their children's privileged education at other people's expense. This is the essence of the argument. The argument is not being put forward that we are in favour a banning public schools. Perhaps it should be, but that is not the argument. The argument is that we should give them tax relief, that we should help to pay for these schools—[An HON. MEMBER: "No."] That is, precisely, and in detail, the argument.

Mr. Patrick Jenkin: I think that the hon. Gentleman was a member of the Government when the 1968 Clause was introduced. Is he now saying that the intention then was to strike at the payment of fees for private education?

Mr. Buchan: No, that is not what I am saying. As I said, they react strongly: as soon as one mentioned the phrase "public schools", reason flies out of the window. I was dealing precisely and in terms with the arguments of the hon. and learned Member for Nelson and Colne (Mr. Waddington), who said that our views are biassed because we thought it wrong that people should educate children at their own expense. What I was saying was that my objection to his attitude and to the argument based upon education which he raised was that I do object to their educating children at other people's expense. But I have not yet got on to the proposition of the Amendment. I was dealing purely with this point.

Mr. Waddington: It was a point which I had no intention of raising. The question of the public schools was raised by the hon. Member for Llanelly (Mr. Denzil Davies). I rose, feeling a little indignant, and pointed out that I was disappointed but not surprised that hon. Members opposite were prepared to turn a debate on the Budget change into an attack on the public schools.

Mr. Buchan: Everything which has been said proves that, as soon as one mentions public schools, they react. The hon. Gentleman now says that he had


no intention of raising this, but this was the whole kernel of his speech—

Mr. Patrick Jenkin: rose—

Mr. Buchan: You see?

Mr. Jenkin: It is just that I want to get it absolutely clear what case is being made which I shall have to answer. I may have phrased my earlier question wrongly, but the hon. Gentleman was a member of the Government at the time when the 1968 Finance Bill was introduced. Is he saying that the reason for the introduction of that Clause, to quote his own words just now, was "to prevent the financing of education at other people's expense"? Is that his case?

Mr. Buchan: The hon. Member is wrong again. I did not say anything of the sort—

Mr. Jerry Wiggin: Yes, you did.

Mr. Buchan: I was dealing with the argument of the hon. and learned Member for Nelson and Colne; I will come to my own point in a moment. We see how they argue for these backwoods arguments: the Treasury Bench backs the defence of the public schools.
I did not say that there was any objection to people paying for their own children's education but only to other people financing that education. As to whether it was introduced for this reason, of course it was not—[Interruption.] It is a matter of equality. This is why it was done. This is why the two things which worry them are making this distinction on the schools aspect and their fear—this is what the hon. Member's argument verged on—about unearned income. This is why we did it and why, in three or four years, I hope, we shall be quick to do it again.
I turn now to the curious case of the "little old lady of Giggleswick" syndrome. In other words, every time an important piece of social legislation is brought forward, there is a little old lady with a string bag in Giggleswick, and because she might be harmed by it, the whole of the legislation has to stop. If a measure is brought in to deal with the rich surtax payer, somehow there is a provision which might affect this little

old lady, so it cannot be done. This is the argument which we have heard today.
The hon. Member for St. Marylebone (Mr. Kenneth Baker) based his argument on two cases. Always we hear about the individual case, and today we heard about the poor widow and the thalidomide child. But this is not what this legislation says. It does not bring in the problem of disaggregation in the case of the thalidomide child or even in the case of the poor widow. Hon. Members opposite know perfectly well what they are doing. They are doing this to find the means of using covenants, deeds, trustees of one kind or another—

Mr. Douglas: For tax avoidance.

Mr. Buchan: This is precisely what it is. It is to save the richer taxpayers £15 million. I believe that it might even be more. But to give some idea of the cost, I would point out that the family income supplement which they put forward with great pride—I watched the programme on television—came to £7 million, or less than half what they will save the rich taxpayer by this mean little action. That in itself is so mean. It is a repetition of the Speenhamland system introduced in the 1790s. But when that finished, about 1830, it was costing the revenue £8 million. So, after a century and 40 years, they have actually succeeded in reducing the amount which was being paid then. That is the meanness of it.
This provision relates to a family income, not to that of the child. Even the arguments about the thalidomide child and the problem of the widow show that this is a family concept. It is in their interests that this reactionary Government want to restore even further elements of concession to the rich taxpayer. It is for this reason that we object to it.
We do believe in equality on this side of the Committee. Our great regret was not that we introduced measures like this, but that we did not succeed in going further with redistribution. There has been plenty of redistribution by the Tories, but the other way round—in favour of the rich and from the poor. What a distortion—[Laughter.] They are laughing. Is this not so? Is not this £15 million, like a whole number of their other measures, quite crisply and directly


moving money from the poor taxpayers to the rich taxpayers?
This is precisely what the Budget does. It was boasted about. This is what they are in favour of—giving opportunities to break through and so on. As I have said before, we have the first Government for over a century who have deliberately turned the clock back in this sphere. They have used even the most progressive element in our taxation, that is, direct taxation, as an element of redistribution. This is not an argument against it, but this is the effect of it, just as I believe that the purpose of this disaggregation is in many cases to secure the buying of educational privilege. Our basic opposition is the lack of equity which this introduces.
A lot was said yesterday about floating the £. This Government are floating the economy by releasing money in the hope that it will achieve their ends. Whatever their policies achieve, they will not achieve equity.
8.0 p.m.
I have always thought it a curious defence for any party to say, when in office, that it gave a pledge at the time of the previous election. Before any pledge is honoured it should be carefully discussed to find out whether it is a good or bad pledge. What is the point of honouring a bad pledge? Certainly none of the other pledges implemented by the Government has resulted in more equity for society. We have witnessed two Conservative Budgets, and both have introduced the element of redistributing income from the poor to the rich.
It is in education that I feel particularly strongly about this lack of equity. This is a question not just of the redistribution of money, but of allowing the buying of privilege at the expense of others, and this is all bound up with our social fabric.
Consider, for example, in this context, the City of Edinburgh and its secondary schools. About 23 per cent. of the first-year pupils attend fee-paying schools. When we move to the fourth year, we find that 40 per cent. of children are in fee-paying schools. In the fifth year—this is equivalent to the English sixth form and is the stage at which the equivalent of the G.C.E. is taken and university entrance examinations are sat—60 per cent. of Edinburgh's pupils are in fee-paying schools.
This is an indictment of the policies of hon. Gentlemen opposite, because this state of affairs is drawing away from State schools staff and resources who are going to the fee-paying sector. Such a small "top" is being created at State schools that the right variety of courses cannot be given. Inequity is the result and, as I said, this has a strong bearing on the very fabric of society. We are speaking of a great number of cases and not about some little old lady from Giggleswick.

Mr. Waddington: The hon. Gentleman has said more than once that children are being educated at somebody else's expense. If a grandparent pays for his grandchild to attend a fee-paying school—that is, at the expense of that grandparent—how is the child being educated at somebody else's expense?

Mr. Buchan: The hon. Gentleman should read the Bill or ask one of his Treasury Ministers what this is all about. The grandfather is paying for the child, but the aggregation which is introduced to defray the cost means that it is being done at the expense of others. In other words, we are dealing not simply with the grandfather who pays the fees, but with the aggregation that results from his paying the fees.

Mr. Kenneth Baker: Does the hon. Gentleman recall the case mentioned by the late lain Macleod in a letter three years ago about a specific family of three children? The breadwinner had been killed in an accident and the firm which had employed him had established a fund of £12,000 for the three children. The income on that fund would probably yield about £500 a year, but spread over the three children it would not have amounted to much more than £150 each. Is the hon. Gentleman saying that that sum must provide for their education and that nothing else must be done? There are many cases of that kind—this has nothing to do with the little old lady from Giggleswick—which were brought into taxation by the legislation of the Labour Government.

Mr. Buchan: I am not certain about that case and I will have to look at it more closely. My only comment is that if the Government had that kind of case in mind, they should have spelt it out.

Mr. John Hall: I accept that I have made a number of interventions. Indeed, there was a time when I felt that I might have been interrupting a private conversation. However, I am glad of this opportunity to make a few comments in my own right.
When debating a matter of this kind, it is inevitable that we will have speeches like the one made by the hon. Member for Renfrew, West (Mr. Buchan), who seems to think that my hon. Friends are obsessed with the problems of public schools and that we resent any attack made on them. Is he aware that until the question of fee-paying schools was raised from the benches opposite, my hon. Friends had not even referred to public schools? I suggest that the obsession with this issue exists on the benches opposite.
If it is any comfort to the hon. Gentleman, he may care to know that it is not necessary for an income to be settled on a child, by a grandfather or parent, to be able to find ways and means of putting aside sums to pay for the child's education. I will not weary hon. Members by going into them.
In the case that was debated at considerable length when the Finance Act, 1968, was proceeding through the House, many examples were given, not only by the late Iain Macleod but by other hon. Members, bearing no relation whatever to the payment of fees for education. For example, I put forward two cases that had come to my notice from my constituency.
One was the case of a man who had married a widow who had a large family, the children having had incomes settled on them. They had become liable, though the man was of modest means, to pay tax on the aggregated income, although that man had no control over the incomes of the children.
The second case was of a daughter who was in conflict with her parents. I was asked to intervene in the family row, which I did—a dangerous thing for anyone to do—and her grandfather supported her in a desire to take a particular training course. He provided the money, against her parent's wishes, and the parent found that the income which the grandfather had settled on the girl was aggregated with his and that he had to pay tax on it. They were two cases among many

which were adduced in Committee upstairs on the Finance Act, 1968.
The trouble with that sort of fiscal measure was that it was not only designed to give effect to the philosophy that had been advanced by the then Chief Secretary, now Lord Diamond—that the family should be treated as one unit—but was designed, as are so many fiscal Measures, to catch the tax evader.
Our tax law is full of complicated Statutes designed to catch the few who evade paying tax, often in a large way, and in so doing the law penalises the vast majority of people who are dealing with their tax affairs in a decent manner. I have no doubt that people have abused the privilege which enabled them to settle money on their children, but to catch them we have passed laws which have resulted in many people, both parents and children, being penalised.
There are three good reasons why we should reject the Amendment. First, at the conclusion of the Committee deliberations on the 1968 Act the late Iain Macleod, who had been genuinely moved by what he thought was the injustice of the matter, pledged the Conservative Party to repeal that piece of legislation when we were in a position to do so.
The second reason is that we made clear both before and at the election precisely what we should do. The hon. Member for Renfrew, West said that the making of a pledge was itself no reason why one should carry it out; it may or may not be a good pledge. I can understand his taking that view, but it is not a view which we share on this side.

Mr. Buchan: Is the obverse true, then, that, if one has made a bad pledge, one should carry that out? Is that what the hon. Gentleman is saying?

Mr. Hall: Generally speaking, if we make pledges, there are good reasons. We regard this as a good pledge. I do not claim that there is any virtue in consistency as such, or that one should always carry on doing the same things. Obviously, if what one proposes to do at one stage turns out later to be wrong, one will not want to do it. But we have given many good pledges, this is one such, and we ought to honour it.
I shall not bore the Committee now, but I can think of many instances when the present rule has acted harshly. If hon. Members wish to look into the case histories, they will find them in the proceedings on the Finance Bill in 1968, and in 1969 when further provisions and Amendments on similar lines were discussed.
It is wrong to introduce legislation designed to catch the few which penalises the many. Yet it has often happened, and this is only one example of the unfortunate effects of our fiscal legislation The Government are wholly right in introducing this Clause. Those hon. Members who would delete paragraph (a) are misguided in their opposition, believing that the Labour Government's measure was meant for purposes quite other than those for which it was really intended.
Hon. Members opposite are obsessed with the idea that the whole purpose of such Clauses as this is to finance public school education. From my own experience and the cases brought to me from time to time by constituents who have been penalised, I can assure them that that is far from the truth. I ask them to accept that from me. There may be all sorts of reasons why they want to vote against the Clause, but that should not be one of them.

Mr. Dalyell: We have heard from the Government side various sad stories of separated women, women in trouble, widows and so on, who have peculiarly hard problems to face. I was responsible for bringing in a Bill to deal with alimony and maintenance orders. I shall not go into the details of that Bill, but I have recently had an enormous amount of correspondence from women in difficulties because maintenance orders made in their favour by the courts have not been implemented.

Mr. William Hamling: And who blocked that Bill?

Mr. Dalyell: When one receives that kind of correspondence, one realises the acute poverty—not tax disadvantage or tax unfairness, but real poverty—which these women suffer. That others should be subsidised out of the public Exchequer when there are women in real need of that kind is, to me, absolutely intolerable. The hard cases of which we have been

told by hon. Members opposite are somewhat bogus. I go along with much of what lay behind the memorable phrase used by my hon. Friend the Member for Renfrew, West (Mr. Buchan) when he spoke of the little old woman in Giggleswick. Anyone who has received letters of the kind which I have had on the subject of alimony and the like in the past three months must feel that some of the arguments and stories told by hon. Members opposite are pretty strange and out of perspective.
What is more, a Clause of this kind poisons the whole idea of fairness between one citizen and another. It creates an atmosphere in which many people feel that others are getting something for nothing. This is intolerable. I endorse what was said by my lion. Friend the Member for Heywood and Royton (Mr. Barnett). This is a positive act of subsidy by those who can less easily afford it to those who, almost certainly, are in a higher income group. It is turning redistribution in the wrong direction.
8.15 p.m.
It poisons the whole atmosphere because there are a good many people, decent people, who do not want to do what the Government are allowing. Nevertheless, they feel—I suspect that there are quite a number in Conservative associations throughout the country —that, if they do not do it, they will be letting their families down. Loyalty to the family is in conflict with what many people regard as right, and there are, I am sure, many fairly well-to-do people who, in themselves, wish that the law were slightly different. There are many decent people, of all political parties and none, who do not like the business of having to mess around with lawyers, under family pressure, to make arrangements of this kind. Hon. Members opposite know that there is a good deal of truth in what I say.
The Clause leads, therefore, to a deep feeling of corruption in our tax system. On grounds of principle, I regard it as bad.

Mr. Patrick Jenkin: May we have this point right? Is the hon. Gentleman suggesting that one of the purposes of Section 1:5 in 1968 was to place an obstacle in the way of grandfather


covenants because, basically, grandfathers did not really want to do it and, therefore, they ought to like the Amendment?

Mr. Dalyell: No. I am making a rather deeper point. There are a lot of decent people—I do not say that they are the majority—who do not like this fiddling around with the tax system and who would rather have a straight tax system than a devious one.

Mr. Peter Rees: We have heard some highly charged language from the hon. Member for West Lothian (Mr. Dalyell). Perhaps naïvely, I was surprised, until I heard their speeches, that hon. Members opposite wished to have this Amendment taken on the Floor of the House. I imagined that they would prefer it to be discussed in the decent obscurity of the Standing Committee. The Amendment is designed to perpetuate a shabby little measure introduced in the Budget of the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) in 1968, and I am sorry that the right hon. Gentleman is not here to see its interment.
I had always been led to believe that the right hon. Member for Stechford represented the fine flower of Balliol, but the Finance Bills which he introduced were reminiscent not of Lord Oxford and Asquith, but of Lloyd George in his Limehouse moods. Perhaps he regards measures of the kind which we are now discussing as mere vulgar detail which he prefers to leave to his hon. and learned Friend the Member for Lincoln (Mr. Taverne). If that be so—I am glad to see the hon. and learned Gentleman here—perhaps we may be told the thinking behind it. We shall look forward with interest to the deep thinking of the Institute of Fiscal Studies, though I hope that it will not on the same lines.
The most sophisticated argument which we have yet heard in support of the Amendment and the original provision in the 1968 Act is that the family is a single spending unit and should be taxed as such. Hon. Members will be aware that the concept of the undivided Hindu family obtains in the Indian fiscal system. We should not be too proud to learn from the fiscal systems of the Orient when they have something to

teach us. But, if we are to adopt the concept that the family should be treated as one, we must not be selective in the measures we take to advance it.
If the family is to be regarded as one unit, there should be no capital gains tax charged when, say, a father gives part of his property to his son. It is moving inside the family unit, which is one unit, so fair is fair. Again, if the head of the family gives or bequeaths part of his property within the family, why should estate duty be charged? It remains within the continuing unit. Why estate duty at all in such circumstances? I, therefore, regard that as a specious argument which does not take us far.
I detect that the basis for the Amendment and the original provision is an obsession with tax avoidance. The hon. Member for Heywood and Royton (Mr. Barnett) disclaimed any obsession with tax avoidance, but his disclaimer did not ring true. If we have a system of very high tax rates such as we have had—this is the first Budget since 1962, I think, which has made an attempt to bring them down—we will inevitably, in proportion, have tax avoidance.
We must face these facts of human nature—people will not willingly part with their income to the Exchequer when they feel in their heart of hearts that the tax system is at an unfair rate. Many people, of all political parties, feel that tax rates are far too high. So I detect that the true basis of the Amendment is the obsession of Labour hon. Members with tax avoidance.
Here I pause to analyse the three sources from which the child may have a separate income of his own. Here I should perhaps make a personal statement. In all three categories there are examples in my own family, but I hope that Labour hon. Members will accept that I am not arguing against the Amendment because to do so may advantage members of my own family.
The first source of income is settlements. I concede that many settlements nowadays are executed for tax avoidance reasons, but let us distinguish between tax avoidance and tax evasion.

Mr. Michael McGuire: The P.A.Y.E. man knows the difference.

Mr. Rees: I have known P.A.Y.E. men who have both avoided and evaded


tax. Many people paying P.A.Y.E. have second jobs in the evening and do not disclose their incomes from them. I find it difficult to discourage them, because it is probably the only way in which we can get that extra little bit of work out of them. Let us not pretend that tax evasion or avoidance is confined to any particular social or economic class. It is rife throughout the country, because we have a high-rate tax system, and Labour hon. Members must face up to this.
Not all settlements are entered into for tax avoidance reasons. There are innocent settlements. Some have been running for many years, since before the war. There are cases falling into that category which are not tax avoidance situations.
There are also sources deriving from divorce or separation. One hon. Member opposite suggested that it was perhaps an abuse of the tax system to tell the courts, "We want this maintenance paid direct to the child", because up to 1968 it would be taxed as the child's income. I regard that as a perfectly legitimate exercise, and I feel that most objective people will accept that too.
It is not right to say that it is only the richer classes who can take advantage of that because the poorer classes will have to go to the magistrates' courts, and that therefore perhaps that kind of solution is not open to them. But those who go to the magistrates' courts are probably not paying tax anyway, so I do not regard that as a very fair comparison.

Mr. McGuire: I mentioned the P.A.Y.E. man just now, and I apologise for having done so from a sedentary position. The hon. and learned Gentleman will be aware that the head of the Civil Service Inland Revenue union or association has said that the P.A.Y.E. man contributes little to the massive tax evasion which goes on, and which is illegal, and has very little opportunity for tax avoidance. That was said by a man who knows more about the question than most of us in the Committee.

Mr. Rees: By definition, he probably does not know too much about the actual figures of evasion, though he may suspect. But I will match his experience with mine. I know very many P.A.Y.E.

people who are evading tax. Does any hon. Member honestly believe that even half the charladies of London are declaring their earnings? I doubt it. I do not blame them, because there is no incentive to go to work when there are high tax rates. The Government are dedicated to alter that situation. People will operate within a fair tax system. With a tax system that they do not think to be fair, they will try to operate outside it. The more sophisticated, richer people will take advice and go in for avoidance. Those who do not have access to such advice will operate outside it, and it will become evasion. That is the corruption we should be aiming at, and it is not what the hon. Member for West Lothian (Mr. Dalyell) had in mind.

Mr. Taverne: The hon. and learned Gentleman, who is concerned with fairness, rather dismissed the unfairness of having one system for those with High Court orders for maintenance and another for those with magistrates' court orders. He said that most people who obtain maintenance orders in the magistrates' courts do not pay tax. Did he base that statement on research? What grounds has he for saying that there are not far more people affected by magistrates' court orders than High Court orders who have to pay tax?

Mr. Rees: Perhaps the hon. and learned Gentleman will tell us the scale of magistrates' court orders and then the Committee will be able to judge for itself.

Mr. McGuire: The hon. and learned Member for Dover (Mr. Peter Rees) cannot get away with it like that.

Mr. Taverne: I will answer that point later.

Mr. Rees: The final category of sources of income for children are sources that result perhaps from the death of a parent, when children are left money or perhaps benefit from an annuity fund set up by the company employing their deceased parent. By no stretch of the imagination can that be called an exercise in tax avoidance. Labour hon. Members are becoming obsessed with tax avoidance. Instead of trying to stop up the loopholes, they would do much better to take a long cool look at the system.


Is it not better to try to reduce rates across the board, which is what the Government are dedicated to doing?

Mr. McGuire: Does the hon. and learned Gentleman realise that for the man with two children earning £30 a week to have had 6d. knocked off income tax, before the Government increased school meals and prescription charges, was worth about 4s. a week?

Mr. Rees: The hon. Gentleman must realise two points. First, this Bill is, I hope, only the first instalment of many measures to reduce tax. When making a start one does so in those categories which bear the heaviest burden of tax. I do not find anything particularly odd about that. [Interruption.] Although this is a cause of merriment to hon. Members opposite, it is a profoundly serious problem, because a great deal of talent is being driven to find work abroad or to undertake jobs that are only marginally useful to the economy, because they perhaps enable them to pay a little less tax. I would prefer a system that encourages people to work in this country and earn big money and keep it. That is the only way in which we shall unlock the latent talent of the country.
I shall not follow the hon. Members who strayed into education, because I regard it as a gigantic red herring. If that was the justificaton they advanced in 1968 for introducing their measure then, I would treat that argument with a little more respect—though not a great deal more—but it was not.
I shall vote against the Amendment and for the Clause with real conviction and pleasure because it reverses a rather shabby, mean, little measure which was unworthy of the previous Government.

[Sir ROBERT GRANT-FERRIS in the Chair]

8.30 p.m.

Mr. Douglas: Certain arguments have been advanced, particularly by the hon. and learned Member for Dover (Mr. Peter Rees), in relation to abolishing or at least phasing out the differences between earned and unearned income. I take the view, which I stand by wholeheartedly, that there is a distinct difference, in terms of equity and in terms of social back-

ground of the income, between earned and unearned income and that, this being so, they should be taxed differently. I see no reason why we should move, as the Government are, towards fading away the distinction between the rates of tax which should be applied to earned and unearned income.
The hon. and learned Gentleman spoke about why we should or should not make a distinction in the family unit in relation to capital gains tax. He said that if we were going to take the income unit as the family, there should be no subjection of a capital gain to taxation if, for example, that gain were accruing to the son on the death of the parent. But one would have a locking-in of society and little redistribution of income within the society as a whole by that means. I do not think one necessarily stands on fixed principles and drives them to illogical conclusions. The logic of the view I hold here relates firmly to equity. It relates to the concept that, if we are to have a system of society in which people have the possibility of transferring income flows from grandparents or parents to children, and using a flow of unearned income to subsidise, as it were, a family unit, that situation should be looked at by society as a whole.
Hon. Members on this side of the Committee are not unmoved—we are not hard-hearted—by the pleas put forward about thalidomide children, for example. But it is difficult to accept that all these income flows in such particularly sensitive parts of the community would amount to about £45 million. If the proposal here involves some £15 million, then the total flow must be in the region of £45 million. I find it difficult to believe that we have such a number of people in society who have had income of this nature settled on them to a total of about £45 million and are going to be ameliorated by the Clause to the tune of £15 million. That is a difficult piece of statistical information to believe if it is to be quantified like that. I hope that the Financial Secretary will give some information of the numbers who might be affected.
Hon. Members opposite have been squeamish when we have touched upon the issue of privilege in education. I readily see why. This is an issue where the two sides part company. Their view of education is totally different from ours.


They view it in terms, to use their own phraseology, of "arranging one's affairs". How are one's affairs aranged in relation to education? To them, education is a ladder and one is always going up the ladder of education. But if one is on a ladder, the probability is that there is someone above who is standing on one's knuckles, and to keep one's place one is standing on someone else's knuckles. This provision is a device to keep certain places on the ladder.
The Financial Secretary, in an interjection, seemingly tried to place some of us in difficulty, but I will face the issue. I do not believe that this was the prime motivation of the provision in the 1968 Act, but I also do not think that the consequences in relation to education were totally undesirable. I think that it is undesirable that, if we have a system of education where people want to pay for it, they should if possible pay for it out of their earned income flows and not out of unearned income flows, which are the basis of privilege. I do not run away from that issue, and I have as great faith in the background of my old school as some hon. Members opposite, rightly or wrongly, have in theirs.
I think that the Government will have extreme difficulty in arguing the case that they are proposing this Clause on the basis of looking after these particularly unfortunate sections of the community. The late Iain Macleod's name has been mentioned on both sides of the Committee—rightly so, because he was a man of compassion and understanding. But I think that if he had been responsible for this Budget he would have had much more concern for the 820,000 unemployed than for the very small minority who hon. Members opposite are arguing should be protected.
The real reason for the Clause is that it will perpetuate the possibility of keeping rigid class divisions in our society. One of the sad things I have experienced in this House is that the Government are pushing through measures which are stirring up pools of class division which I thought had been stilled. Some hon. Members opposite are young and abrasive and have no experience of the trials and tribulations of unemployment and poverty. From their point of view and background, they will support the Clause.

From my point of view and background, I oppose it because I recognise that what our society wants is not division but healing and 'hat this type of provision will cause division. As my hon. Friend the Member for West Lothian (Mr. Dalyell) said, it creates a feeling again of unfairness and injustice. I do not want a system of uniformity, but indeed the system which the Government are pushing through will perpetuate feelings of unfairness and injustice, and that is why I support the Amendment.

Mr. Kenneth Lewis: I suppose it was entirely predictable that the Opposition should choose to oppose this Clause. They introduced this measure in 1968, but it had taken them a long time to do so. They had several years to do it but waited until then to introduce this aggregation of children's income with that of the parents. The only reason why it was introduced was that there was a battle within the party between those who wanted a wealth tax to fulfil an election pledge and the Opposition Front Bench who, in the main, did not wish to have a wealth tax. This was one minor way in which they were able to convince the extreme elements in the party that they really were going for the rich.
It was a puny measure. Almost all hon. Members opposite have argued as though the rich should have no privileges whatever arising from their wealth. Obviously, if people have wealth much of it is accumulated from earnings. Hon. Members have talked in terms of wealth as though none of it was accumulated out of earnings, but quite a lot of it is. It arises from savings, from investments which grow in value. At a middle stage of life there are a lot of people who started with very little and who have accumulated some money. It is right that they should be allowed to do what they want with their money.
We are in the ridiculous situation in which lion. Members opposite apparently say that it is right that a person should be able to buy a house for his mistress or secretary, or someone of that sort, but he must not make any funds available to his children. If money is made available for a child it arises from savings. It may be the present generation's savings or the past generation's, but it is savings that


have been accumulated. The judgment of the father or grandfather is that the money should be passed down. Clearly there is a tax advantage, but that is only there because the person who already holds the money up to this point has been able to retain only 6d. in the £. Whatever he has, he is still left with his income tax at a very high rate.
I believe that it is a mistake to give children too much money at too young an age. It is not an advantage to them. There is something to be said for making sure that their education is soundly based, if that is what is wanted, but otherwise it is a mistake to give them too much. Children suffer from it.

Mr. McGuire: The hon. Gentleman also thinks that it is a mistake to give it to the workers.

Mr. Lewis: The workers do very well. I understand that recent wage increases have been going ahead so fast that both Government and Opposition are concerned about inflation. They do reasonably well from their incomes. I am sure that hon. Members opposite understand that there are those who, whether we like it or not, have plenty of money and who invest in industry, thus enabling workers to keep in full employment. Hon. Members opposite have spoken of unemployment and one of the ways of getting rid of it is through people putting money into industry, expanding the economy.
It has been said that we have a phobia about the public schools, but the matter was not raised on this side of the Committee. We have had from several hon. Members opposite a clear indication why this matter was introduced. It seemed clear to me that they were trying to prevent the payment of fees in public schools by parents or, particularly, by grandparents. I did not go to a public school so I am not personally involved, but I have in my constituency about three public schools—it is almost our main industry. I am connected with two of them and I want to tell hon. Members opposite that the public schools are not filled with children whose parents are in the category dealt with here. The public schools are filled with the children of parents who are in the middle-income group. Most of them do not have grandparents who could help to pay the fees.

The parents of most of these children could not set money aside to save their lives, for most of them are scraping to pay the fes. It is the children of such people who are filling the public schools. There may be parents at the top end of the income scale who are paying fees out of the income of their children, but they are very few.

8.45 p.m.

Mr. Thomas Swain: My hon. Friend mentioned the public school system not to castigate it but to bring to the notice of the Committee the fact that children being educated at public schools as a result of the Clause would be educated as a privileged class in society by a Tory contrived tax-dodging provision.

Mr. Lewis: What I am saying is that the number of people affected by this provision and with children at a public school is very small. Not to make this change would make no difference to the public schools. They will survive or not on the people in the middle band of income. Those people may find it difficult as inflation puts up costs and fees, but they will endeavour to send their children to the public schools which will survive on those people and not on the rich who are able to hand down money to their children.
I did not find it extraordinary when the Labour Government introduced their provision, because it was typical of the kind of class provision which the Labour Party would introduce. It was introduced to placate certain members of the Labour Party who wanted the Labour Government to go further. However, the Labour Government said, "This far we shall go". But I am surprised by the attitude of Labour Members. People with money may give it to a charity, or to any other relative, and not be caught by this provision.

Mr. Swain: They can give it to the Tory Party.

Mr. Lewis: They can give it to Tory Party, and certain wealthy people have been known to give money to the Labour Party. Wealthy people can give this money to anybody else and not be caught by the provision.
But charity begins at home, for the rich and for the poor. People tend to


help those nearest to them first. I believe that it is a mistake to lace children with too much money too young, but it is equally ridiculous to leave it until it is too late, until the parent is at death's door.
In the last Parliament there was introduced a Private Member's Bill, which had Government support, which changed the law of divorce. I was involved in the discussion, which lasted for many weeks. Divorce is now much easier. In a year or two, probably before the end of this Parliament, many marriages will have been broken which have been waiting to be divided. The children will require support. Under another Measure linked to that change, the courts will lay down financial provisions for both parties and for the children. The courts must be able to ensure that provision is made for the education of the children. They may be in the middle of their education. Alternatively, they may have to make provision for the children to be looked after because of the break-up of the marriage.
The Government were right to put the Clause in the Bill. In this connection, I see no difference between unearned advantage and earned advantage. Children are not stopped from earning money. Attempts have been made to restrict the age at which children earn. They have never been very effective. Children who appear in television advertisements earn quite large sums. Going down the scale to the other extreme, plenty of boys earn money by delivering newspapers. There is no restriction on what they earn.
There is no restriction about children winning the premium bonds. A child can win £25,000. When the Bill is passed, he will be able to win £50,000. Hon. Members opposite say that the income from it should be aggregated with that of their parents.

Mr. Douglas: Why not?

Mr. Lewis: Why? Many children have premium bonds. It is a favourite form of gift which aunts and uncles give on birthdays and at Christmas. There is nothing to prevent children from winning quite large sums of money from the the Treasury, and there is no reason why the income from them should be aggregated. It is their own money and not that of their parents.

Mr. Douglas: The hon. Gentleman is defeating his own argument. He has made the point that children should not be spoiled by having too much money. But if a child wins the premium bonds he will not have the exclusive use of the money. Surely it will be aggregated. Why should it not be taxed?

Mr. Lewis: Of course the child will not have the use of the money. The income from the money, which will be invested, will be trusted and added up each year. It will be used for any purpose on which the trustees decide. It will accumulate until the child is 18 or 21 years of age. I do not suggest that he should spend the income. I am saying that it should be the child's income and should not be introduced into the family budget so that the parent must pay tax on it. That would be the situation without this Clause.
Young people of 18 going to university —we meet them in the Members' Lobby —say that they cannot manage because of the means test imposed on their parents under the grant system. At least some advantage is to be gained by the parents and the child if money is available to the child, from whatever source it comes—it may be provided by grandparents who invest it for him—and added to his income while he is at university. Many university students find it extremely difficult to manage while undergoing their higher education because of the means test imposed on their parents.

Mr. Michael Meacher: It has been said that the fundamental inequity of the Clause is the invidious distinction being drawn in practice between the treatment of the children of the poor and that of the children of the rich. A clear and outright anomaly is being created in the concept of family under fiscal law, on the one hand, and welfare law, on the other. In every aspect of welfare legislation an individual's claim for benefit is always assessed explicitly within the context of the family unit. This is pre-eminently the case in regard to claims for supplementary benefit by an individual, subject to certain minor disregards, with earnings by any child being fully taken into account according to a prescribed scale. The same rule also apply in the case of local authority discretionary means-tested benefits. Nor is it a convention which


hitherto the present Government have seen fit to repudiate.
In regard to the income in Family Incomes Supplement pioneered by this Government, the relevant yardstick for eligibility is the gross family wage. In strict application of this principle the F.I.S. regulations make it clear that any earnings or unearned income of any older children should be fully taken into account for computation purposes. Nor is the idea of disaggregation a sudden change of mind by the Government, since there is no reason to doubt that with the second means-tested benefit that the Government are introducing, namely, housing allowances, the same criterion of family income, with children's earned and unearned income taken into account, will be applied. One can only conclude that the reason for the deviation from this hitherto virtually universally applied concept lies in the sectarian interest of that small but highly significant minority of the rich, whose preservation has always been the traditional raison d'être of the Conservative Party.

Mr. Peter Rost: Rubbish!

Mr. Meacher: If any better explanation can be found for it, I have yet to hear it from the debate today.
This idea is reinforced by Clause 15 where the validity of the family concept is breached by the option of separate assessment for taxation purposes of a wife's earnings. The blatant class bias of the Government's selective disaggregation proposals is exposed not only by the tiny number of children with significant unearned income, but also by the fact that separate tax assessment for wives is a surtax concession limited to those with incomes over £5,250 a year.
The highly partisan bent of these new measures is poignantly illustrated this very day by the Supplementary Benefits Commission's report on cohabitation, which makes it clear that the unmarried poor couple living together, with the woman dependent on supplementary benefits, so far from having the option of separate assessment, are forcibly conjoined by allegations of liaison to the extent that the woman may be deprived of benefit on the ground that she is regarded as being dependent on the man.

Probably no Government in recent times have ever contrived within a single day to bring forward measures of such clashing and inconsistent principle. Nor in regarding Clause 10 as a form of special pleading, indeed in straightforward terms as abuse, am I alone. I should like to quote some words:
A situation might arise in which parents deliberately arranged that some of the income due to them was put into the name of one of their children. If that happened we should have to take it seriously, because it would be inequitable as between one household that did not do it and another that did. It is simply in order to protect the public purse against abuse of that or a similar sort that I wish to keep this regulating power in the Bill."—[OFFICIAL REPORT, 18th November, 1970; Vol. 806, c. 1292.]
Those were not the words of some hardhearted Labour Minister tilting at the windmills of the rich. They are the words of a highly honourable and intensely well meaning right hon. Gentleman, the present Secretary of State for Social Services, on 18th November last, when piloting the family incomes supplement through the House. If it is an abuse as he said to be taken seriously, indeed to be blocked, that a poor parent arranges that part of his income due to him is put into the name of one of his children, then it is equally an abuse that all those grandfathers suffering from a surfeit of surtax should seek to relieve themselves of their burden by this antisocial tactic so roundly condemned by the present Secretary of State for the Social Services. The principle in both cases is unequivocally identical and the only relevant difference would appear to lie in the political inclinations of the different parties involved. No one could ever deny that the Conservative Party looked after its own.
9.0 p.m.
Another disturbing aspect concerns the Treasury's apparent ignorance of the precise income distributional effects of the disaggregation proposed. The Financial Secretary will know that I recently tabled a series of Questions on this point, to which, I am bound to say, the answers were singularly evasive and unhelpful, and embarrassingly so.

Mr. Patrick Jenkin: I assure the hon. Gentleman that it was no part of my intention, in giving him what I fully recognise to be very unhelpful answers,


to evade the Questions. I ask him genuinely to believe that I and those who advise me could not understand his Questions. Where we could, we gave some answers, but the majority were drawn in such a form that they simply did not admit of an answer.

Mr. Meacher: Let me go through a few of the Questions. I asked what estimate had been made in the case of children under the age of 18 covered by by covenants in 1967–68 of the cost in that year and in 1972–73 respectively of the income tax and surtax relief accruing to grandfathers, and how many of these children had parents with an income over £5,000, £7,500, £10,000 and £15,000 respectively. I was told that the information was not available. It certainly should be.
I also asked what would be the cost in loss of tax from the reintroduction of the non-aggregation rule in the case of children under the age of 18 covered by industrial and company schemes whereby public school loan stock is bought and school fees are waived. I was told rather curiously, that the Financial Secretary did not understand what schemes I had in mind.
I also asked, relevantly to this debate, on 11th February this year, how many accumulation settlements exist in Britain at this time in favour of infants, what was the total capital value of the sums at present covered by them, and what was the estimated saving in family liability to income tax, surtax and estate duty estimated to be achieved at present by their use. Again I was told that the information was not available.
Though difficult and technical questions I do not think that these are unreasonable questions. I regard the absence of the facts to answer them as thoroughly deplorable. But even if those precise questions cannot be answered by the Minister, will he state what he knows about the number of children currently in receipt of unearned income and how many receive such income of particular scaled levels? Will he also state, with regard to children in each of these unearned income bands, what he knows about the range of parental incomes involved, and the tax savings accruing at each unearned income level as a result of these disaggregation measures?
That is not at all an unreasonable request. It seems that if a sum of £15 million to £20 million is involved—I notice that the financial statement gave the lower figure; it is probably well over £15 million and about £20 million—according to an answer on 11th February, it is surely requisite, with a tax concession of this magnitude, that we know the precise distribution of the personal gains involved. I stress this because the Clause is not only a major tax give-away in its own right but it also has a crucial rôle with regard to the tax avoidance machine which will soon be rumbling in the City.
We know that gifts inter vivos valued for stamp duty have been climbing steeply throughout the 1960s to a current level of about £135 million a year. We know also that the age group where wealth is most unevenly distributed, according to a survey by Lydall and Tipping, is that of young adults between 20 and 24. It is clear that any apparent reduction in the inequality of wealth which is supposed to have occurred since the war is a mirage. It conceals that what has happened is that there have been massive transfers of wealth within families from older to younger members.
Clause 10 carries the vital implication that not only will those transfers between family generations of substantial quantities of capital escape the estate duty net. It also has the implication that the surtax embarrassment which would otherwise be caused to parents of the favoured child is to be swept away. As such, it is a major encouragement to tax avoidance on a massive scale.
The function of Clause 10 is clear. It is not the act of a tax-reforming Government. Its justification is not technical but partisan. Like all such politically motivated measures it should be rejected.

Mr. Hamling: One of the ironies of this debate is that it contrasts with the debate in Committee on the Finance Bill in May, 1968. Then, the Conservative Party was not claiming that there should be a change across the board. It was not claiming that the aggregation of income should be wiped out altogether. It was not claiming that the aggregation of investment income should be swept away.
The late fain Macleod moved an Amendment which he described in column


849 of the OFFICIAL REPORT of that day as being concerned with specified classes of income. The debate on that Amendment was interpreted strictly by the Chair as not dealing with general principles. It was dealing with specific cases, especially with what became known as "little (c)", and it had nothing to do with general principles.
When lain Macleod spoke in that debate, he is reported in column 974 as saying:
We are not concerned either with the generality or with very wealthy people. We are concerned with the exemptions to which ordinary common sense and humanity alike demand that the Government should agree."—[OFFICIAL REPORT, Standing Committee A, 15th May, 1968, c. 974.]

Mr. Patrick Jenkin: I apologise for interrupting the hon. Gentleman, but I cannot find those words in column 974 of the OFFICIAL REPORT, for 15th May, 1968.

Mr. Hamling: The words appear in that column in the volume that I have. I will pass it to the hon. Gentleman, and he can see for himself.
It is remarkable that, when the present Government have had a chance to fulfil their pledges, they do not come back on these special cases. They come back on a general case, not to do with earned income, not to do with hardship, but to do with investment income and income across the board. That is the Clause with which we are dealing. Is the hon. Gentleman quite happy now?

Mr. Patrick Jenkin: It is most mystifying because it is quite different from my volume.

Mr. Hamling: Such is life. That is why we perhaps get it right.
It comes as a surprise that the Government should have such a strange sense of priorities. They deal with this particular tax change in their first Budget and Finance Bill. We cannot call it a tax reform. It is not a reform; it is a tax regression in the double meaning of that word. It is a regression historically. It is a reversion to type. It is the restoration of devices for tax avoidance. One must be careful about using the word "avoidance". I remember that, when discussing the matter upstairs in 1968, one hon.
Gentleman chided me with talking about tax evasion. I was most careful in that debate not to use that term. I know that the Front Bench spokesman for the then Government, now the noble Lord Diamond, talked about dodging. But dodging is not tax evasion; it is tax avoidance. I call it moral evasion. It is the evasion of one's moral obligations to the community in which one lives.
It is remarkable that one of the first priorities in this Budget should be this particular device. If the Government were concerned for the hardship cases about which they waxed so eloquent in 1968, they could have taken specific steps in this Bill, to produce Amendments along the precise lines of what they wanted to do. We would not have any right to complain if they did that, but they are not doing it. This is right across the board.
Another astonishing thing about the Bill, the debate which we have had and the publicity which has taken place, is the constant boast by the Government about what they are doing for the poor. Is this a device for assisting the poor? Nobody has gone on television or on radio to boast about this provision. I wonder why? Why are they so coy about it? Why are they so reticent? Why are they so modest? One thing of which the Government cannot be convicted is modesty. The Secretary of State for the Environment was on television last night boasting about what they were doing—first in this and first in that. But he was not boasting about the restoration of tax avoidance, which is what this device is about.
The Secretary of State for Social Services has been boasting about what his party is doing for the poor. He has not boasted too much about what it is doing for the rich. Right hon. and hon. Gentlemen opposite are curiously reticent about the assistance which they are giving to their wealthy supporters. These are subsidies to the wealthy. It comes ill from a party which is always boasting that subsidies should never be given to the wealthy. Why subsidise the wealthy? Tory policy is that concessions should not be made to people with lots of money.

Mr. Kenneth Lewis: Where is the subsidy?

9.15 p.m.

Mr. Hamling: I will tell the hon. Gentleman. By avoiding tax, the Revenue must make up the difference by taxing more the less wealthy. That is precisely what this is. If the Government are giving £15 million in tax concessions to the wealthy, and they want to maintain the revenue, that can be done only at the expense of the less wealthy taxpayer. On the other hand, if they are saying that they are reducing the tax liability, then surely the obvious thing to do is not to give the concession to the wealthy, but to give it to the less wealthy. In other words, this tax concession is a subsidy for the very wealthy taxpayer at the expense of the not-so-wealthy taxpayer.

Mr. Kenneth Lewis: I apologise for not having heard all the hon. Gentleman's speech, but I had to leave the Chamber to have a cup of tea. The Government have done nothing of what the hon. Gentleman alleges. They have made this concession, and they have reduced taxes. They are a very clever Government. They have done the exact opposite of what the hon. Gentleman is saying.

Mr. Hamling: I hope that the hon. Gentleman will now go out and put another whisky in it. He has confused two things. First, he did not listen to the sentence which I completed just before he intervened. Perhaps I may remind him of it. When I was a schoolmaster I sometimes used to repeat things twice for the slow learner. I said that in giving this tax concession to the wealthy the Government had deprived themselves of the opportunity of giving the same tax concession to the less wealthy. In my view that is a subsidy to the wealthy taxpayer, at the expense of the less wealthy taxpayer.
The hon. Gentleman was foolish enough to talk about tax concessions to the lower paid. What he forgot to say—and I remind him of the speech that I made during the Second Reading debate on the Finance Bill; it is in the Library, and the hon. Gentleman can read it, though he may not be able to find the right page, in the same way as his hon. Friend could not do so a few moments ago, but it is there—was that the tax concessions to the less wealthy were more than offset by the increases in the charges

made for the social services. The hon. Gentleman's was not a very happy intervention, and he should know better.
One of the accusations made by hon. Gentlemen opposite is that this all springs from envy in our part. It is not envy at all. It is a sense of social justice which prompts us to take this view. We have always felt—and our taxation policy has been inspired by this philosophy ever since we were a party—that the wealthier people ought to pay a much higher proportion of their income in tax than the not so wealthy. We believe in much more progressive taxation. Hon. Gentlemen opposite do not. They believe in more regressive taxation, and this device is an example of that.
Because of the careful husbanding of resources by my right hon. Friend the Member for Birmingham, Setchford (Mr. Roy Jenkins)—[Laughter.] One can only look at the figures. One can refer to the fact that in his Budget speech the Chancellor of the Exchequer said that there was £1,000 million to dispose of, but how did the right hon. Gentleman dispose of that sum? The answer is, not to the lower paid taxpayer, but to the wealthy taxpayer, by means of the cuts in corporation tax, S.E.T., and all these other devices. No one will persuade me that the housewife will get the benefit of the cut in S.E.T. It will go into the profits of the distributors. [HON. MEMBERS: "No."] All I hope is that hon. Gentlement opposite will now start a little aggregation themselves and will start aggregating the price concessions, such as they are, against the profits of the big private distributors, such as Tesco, and so on.
The charge is that we did this out of envy. We did it out of a sense of justice. An awful lot of people over the years—as my hon. Friend the Member for Oldham, West (Mr. Meacher) said in his very well documented and unanswerable speech—were avoiding tax. We brought in a device to prevent it, and one of the first things that the Conservative Party did was restore this ability of the rich to avoid ax. Envy, no. Justice.

Mr. John Gorst: Incompetence.

Mr. Hamling: The hon. and learned Member for Dover (Mr. Peter Rees), who was quick to make a speech and just as


quick to get out after he had made it, said a lot about tax counsellors. Increasingly, over the years, tax counsellors and accountants have been used by the wealthy to avoid tax. He said that the poor can avoid tax just as much as the rich. All I can say is that the poor cannot afford his fees or those of the other accountants and counsellors who wax fat—

Mr. Barnett: Hear, hear.

Mr. Hamling: Yes, there is no reason why we should not spoil the Egyptians now and again—

Mr. Barnett: The Zionists, please.

Mr. Hamling: I want to come to the real belief of the Conservative Party in aggregation. They have two rules in this—one rule for the rich and one for those who are not so rich. [Laughter.] Before the hon. Member starts grinning, let me remind him of the attitude of the Tory Party to the means test in the 1930s—[HON. MEMBERS: "Not again."] They do not like being reminded of this. Let me tell them my own family's case—[Laughter.] I was a student at the University of Liverpool from 1931 to 1935, on a grant of £26 a year. That was aggregated under the means-tested regulations of the National, Conservative-dominated Government of the time, and it was regarded as sufficient to keep me for 12 months—£26 a year.

Mr. Barnett: That is why my hon. Friend is so thin.

Mr. Hamling: That was aggregation by a Conservative Government, precisely the same sort of aggregation as that which my hon. Friend the Member for Oldham, West was talking about in regard to the family incomes supplement and social security. The Conservative Party believe in aggregation where rent rebates, rate rebates and council house rents are concerned. I have no doubt that, after the borough council elections, the Secretary of State for the Environment, when he brings forward his fair rents proposals, will aggregate all income for rents. But not for the wealthy. And they talk about envy, about greed, about principle. There is no principle in this except the self-interest of the wealthy.

Mr. McGuire: I had prepared a lengthy speech, but I must put that aside and feel grateful for having a few moments in which to address hon. Members. I am obliged to the Financial Secretary for giving me this opportunity and I promise to be brief.
The hon. learned Member for Dover (Mr. Peter Rees) said that when my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) originally introduced this piece of legislation he brought it forward as a sop to divert Labour supporters who were clamouring for a wealth tax. He went on to say that a lot of Tories regarded my right hon. Friend as the "heart of Balliol."
I mention this only because it enables me to warn my hon. Friends who may one day become Labour Chancellors of the Exchequer that they will do more good if they are known as the "heart of Ince" and if they particularly have at heart the problems of constituents like mine, who were not terribly concerned when this piece of legislaton which hon. Gentlemen opposite intend to repeal was first introduced. It did not affect them one iota and they probably thought of it as a piece of social justice.
I thank the Financial Secretary for some assistance that he has given me in dealing with anomalies that I have brought to his attention. I agree that there are children —thalidomide children have been mentioned, but they are only one group—who receive compensation. My son is in this category and I am at present discussing with the tax man whether he should pay tax on some money that he has obtained.
Hon. Member may recall the case of my boy. He suffered the loss of both legs in a bus accident when he was aged four. My fellow trade unionists in the pits and elsewhere collected £2,800 for him, because he did not get a copper coin from the courts for the loss of his limbs. It was a great tragedy, but there it is. He has now been assessed for tax purposes and a dialogue is going on, with an exchange of letters, and it seems ridiculous for me to be taxed on his income.
I agree that where there are particular cases of hardship, Parliament should, in its wisdom, overcome the difficulties as and when they arise. I pay tribute to the Financial Secretary for the help he


has given me, not only in this instance but in another case. I refer to a group of old-age pensioners in Skelmersdale who banded together to save money for the contingencies of life, such as gas and electricity bills. Being elderly, this suited them.
However, when they drew out the money they found that their savings had gained interest, that the money was regarded as an investment and that corporation tax was required on it. It seemed madness to me. I raised the matter with the Financial Secretary and, with his help, the problem was solved in a sensible way.
I sometimes get annoyed when I hear hon. Gentlemen opposite say that because they pledged themselves to do something at the election they are in honour bound to do it. The hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) said that the main industry in his constituency was public schools. Incidentally, why they are called "public" is beyond me. He said, in effect, that that was the big industry in his area, and he went on to say that he was in favour of good weather on his holidays—that being the sort of line which his speeches usually follow. But the serious point is that the hon. Gentleman chided us for our election pledges, and I now throw out a challenge to him and all his right hon. and hon. Friends about their pledges. I think that it was the hon. Gentleman who, when in Opposition, tried to introduce a Bill to give a pension to the over-80s.

Mr. Kenneth Lewis: No.

9.30 p.m.

Mr. McGuire: All right. I thought that it was the hon. Gentleman, but I remembered wrong. The Tories used to chide the Labour Government for not giving pensions to the over-80s. [HON. MEMBERS: "Shame."] It is a bigger scheme that you conned the public, because you only gave them a part pension; you did not give them—

The Chairman: Order. The hon. Gentleman must not blame me.

Mr. McGuire: Quite right, Sir Robert. I withdraw that. I do not blame you for that offence. But when the Tories were shouting the odds about pensions for the over-80s, did any of them believe in their

hearts that it meant what the present Secretary of State for Social Services said when I challenged him on it—"We only promised them a pension"? In other words, it is like some hire-purchase agreements—people should have read the small print. The Tories never wanted to give them a full pension.

The Minister of State, Treasury (Mr. Terence Higgins): rose—

Mr. McGuire: Iain Macleod has been mentioned today. He has been mentioned that often—

Mr. Higgins: rose—

Mr. McGuire: Just a moment. I am finishing on this. The late Iain Macleod has been mentioned so often today that I half expected someone to go round with a plate. He has almost been sanctified. [HON. MEMBERS: "Shame."] The late lain Macleod made a pledge about family allowances, but the Tories very quickly ditched that pledge. In the same way, it is a shameful thing that they are doing now.

Mr. Patrick Jenkin: A few moments ago the hon. Member for Ince (Mr. McGuire) held the Committee in a sympathetic silence as he recounted the story of the disaster to his own small boy, and, for the first time in this debate, from his side of the Committee, there came a glimpse of what the Clause is all about. We are deeply grateful to the hon. Gentleman, and we appreciate what he said.
I ask the Committee to reject the Amendments. We gave few specific pledges on taxation, but this was one of them, and, indeed, it was the only one in respect of which we specified when Labour's measure would be repealed.
I remind the Committee of the words used by Jain Macleod on 20th May, 1968, at the end of many hours of fiercely contested debate
It, therefore, falls to me to make clear the attitude that the next Conservative Government would take towards this proposal … I wish to make clear that we shall have nothing to do with this Clause and this Schedule. I do not simply mean that we shall amend it
—here, perhaps, is the answer to the hon. Member for Woolwich, West (Mr. Hamling)—
We shall repeal it at the earliest possible moment. We regard both the Clause and the Schedule as bitterly offensive to the principles


of natural justice. We have fought strenuously against it in Committee and we do not regret a moment of the time which we have spent on it. To all those people who have written to us, and to everyone else, I make quite clear that when a Conservative Government is returned, in its first Budget this Clause and Schedule will go."—[OFFICIAL REPORT, Standing Committee A, 20th May, 1968; c. 1076–7.]
As the Committee knows, in our manifesto we repeated the pledge, briefly but in no less specific terms:
We will repeal the Labour changes which have imposed new penalties on children's income.
The Government are fulfilling that pledge to the letter, and no one could or should, have expected otherwise. My hon. Friend the Member for Wycombe (Mr. John Hall) said that that in itself would be a good reason for this Clause.
Of course there are other sound grounds as well. My hon. Friend the Member for St. Marylebone (Mr. Kenneth Baker) asked why it had to wait until next year to take effect. I remind him that just as the aggregation of children's income took effect a year after the relevant legislation was passed, for administrative reasons, so—and I say so regretfully—disaggregation cannot become effective until 1972–73, for the same reason.
We have imposed on the staff of the Inland Revenue substantial burdens with our proposed unification of income tax and surtax and a number of other changes. It is because of the necessary administration involved in these changes that this change could not take effect until next year.
Like a number of other hon. Members, I have re-read most of the 1968 debates on Clause 15 and Schedule 8 of the Finance Bill of that year. I am glad that the hon. Member for Heywood and Royton (Mr. Barnett) recognises—as other hon. Members have—the notable part that Iain Macleod played in those memorable debates. No one who heard Mr. Macleod move the first Amendment in Committee upstairs on Clause 15 will ever forget the passion, the burning anger which illuminated his speech. For me it was one of the most devastating and impressive speeches I ever heard him make.

Mr. Hamling: I agree, but would the hon. Gentleman not agree that the

emotion was particularly directed towards the points I made—the exceptional cases of hardship, cases which are not the subject of this Clause?

Mr. Jenkin: Perhaps I shall be allowed to develop my speech, and the hon. Gentleman will see that Mr. Macleod was not so wide of the mark. That mood of anger was one that sustained us throughout the many hours we debated this clause both in Committee and in the House.
We wrung one valuable and significant concession from the Government. Certain compensation cases were excluded. As the hon. Member for Ince was speaking I reminded myself of the narrow closely defined wording—no doubt the subject of his correspondence with the tax inspector —of the exception which allowed income from compensation paid in satisfaction of a claim for injury to the child. It never went any further.
The hon. Member for Heywood and Royton was wrong to say that we covered all the cases where the compensation goes to the parent. We never covered the case where the parent was killed and the child received the compensation. That still remains covered by the Section. [Interruption.] I may have misunderstood the hon. Gentleman. The main mischief of the Section survived our onslaught on it, and for that reason we committed ourselves to repeal it. We did so because we reject utterly the philosophy which gave it birth. We deplore the miserable inequities of its operation. We condemn the inconsistencies which it inevitably involves. I shall deal with the argument in favour of the Clause and against the Amendments under these three heads.
I begin with the inequities, because, as a number of hon. Members have said, this was the case we made in 1968. The Clause has hit hundreds and thousands of families of quite modest means, many of whom have suffered misfortune in one way or another. Even since the election many hon. Members on both sides have drawn to my attention cases which fell fairly and squarely within the mischief which we attacked in 1968.

Mr. Sheldon: I have not.

Mr. Jenkin: It may be that many hon. Members have not, but I can assure the


Committee that many hon. Members have.
The death-of-the-breadwinner cases are often the saddest. Income on compensation paid to a child under the Fatal Accidents Act is aggregated with that of the surviving parent and, as such, taxed at the parent's top rate of tax for investment income. That can often mean a higher rate of tax than on any other part of the parent's income. It can bring into the tax net a family whose income would otherwise be so low as to be below the threshhold, or it can bring people into surtax hundreds, even thousands, of pounds below the relevant level of income for earnings, because surtax begins on investment income at £2,000 a year less than for earned income.
The noble Lord, Lord Diamond sought to distinguish the death of the breadwinner cases from what we came to call the thalidomide cases, the child compensation cases. He said that there was a vast distinction in principle. I defy any right hon. or hon. Member to detect it. I am willing to bet that the hon. Member for Ince is unable to see it. No one will ever convince me that this is the sort of case in which the tax system should squeeze the last ounce of tax out of the taxpayer.
Then there are the disablement cases, where a mentally or physically handicapped child is helped by another member of the family—a grandparent or other benefactor. A case has been drawn to my attention in the past two or three months involving a spastic girl of 16. The family got together to help, but, of course, found that, in 1969, the girl's income was aggregated for no other reason than that, simply because she was a spastic, she was incapable of working regularly and so taking herself out of aggregation. No amount of academic logic will ever convince me of the justice of that. Again, take the case where the parent has to retire prematurely and the family rallies round to help the children's education. Is this the sort of case to be hit by anti-avoidance legislation?

[Miss HARVIE ANDERSON in the Chair]

9.45 p.m.

All these cases were pressed on Ministers in the last Government, yet they

did nothing about it. I have had cases of court orders—my hon. Friend the Member for Walthamstow, East (Mr. Michael McNair-Wilson) was one of those who drew my attention to this—where maintenance was ordered to be paid to the wife and, separately, sums were ordered to be paid to the children. I concede at once, and agree with the hon. Member for Heywood and Royton, that these are, of course, the minority of the total of court cases. We have never said otherwise. But there were many cases of court orders of that sort which were affected by aggregation.

In such cases of people of very modest incomes indeed—one is talking of incomes of less than £20—the provision can have the effect of taxing children's income at full standard rate, when hitherto both that income and the wife's maintenance had been free of tax altogether. Where is the sense in that? A broken home is one where already the children are inevitably going to suffer severe disadvantages in life, and they should not be singled out for the full rigours of fiscal legislation in this way.

The hon. Member for Renfrew, West (Mr. Buchan) and the hon. Member for East Stirlingshire (Mr. Douglas) comforted themselves that these were the cases of the little old lady in Giggleswick. I want to deal with that, because I have gone into this matter in some depth with officials of the Inland Revenue. The fact is that the provision hits hundreds of thousands of families of modest means.

Mr. Douglas: Hundreds of thousands?

Mr. Jenkin: Ministers in the last Government were warned of that by hon. Members on their own side. The hon. Member for Birmingham, All Saints (Mr. Brian Walden) had this to say:
The right hon. Member for Taunton said that the Clause would apply to tens of thousands of categories. I have a feeling that he is wrong. My right hon. Friend might be able to tell me, but my guess is that it will apply to hundreds of thousands and that, by not having a surtax limit, we have included masses of people."—[OFFICIAL REPORT, Standing Committee A, 15th May, 1968; c. 972.] I asked my officials whether that forecast was right. They described it as an intuitive warning because no one could have known. The hon. Member for Birmingham, All Saints could not have been given an answer, because no-one knew.

Mr. Buchan: If that is the case now, why do not the Government bring in such a limitation instead of opening the door to large-scale tax avoidance by the rich, by repealing the provision as a whole?

Mr. Jenkin: I will deal with that. It seems probable that the hon. Member for All Saints was entirely right. I have asked the Inland Revenue statisticians for the figures. But I hope that the hon. Member for Oldham, West (Mr. Meacher) will realise that we would have to staff the Chief Statistician's Department of the Inland Revenue with tens of thousands of officials if we were to provide the information that he has been asking for in recent weeks. The statisticians have confirmed that the hon. Member for All Saints' institution was not far off the mark. They confirm that hundreds of thousands of families of quite modest incomes are involved where there is no question of surtax arising at all. They have been hit by this provision. I ask why, in heaven's name, the Labour Government thought it right to hit at the lower end of the middle and lower income group families in this way.

Mr. Douglas: Would the hon. Gentleman at some future time give us an indication of the sampling methods employed by the statisticians? He has spoken of hundreds of thousands of families. That means quantitatively more individuals. Will he ask the statisticians to quantify the sums involved?

Mr. Jenkin: I have made it clear that the form in which the statistics are kept does not allow such precise information. But one does not need to go very far on this. Supposing that the average sum of tax involved is the comparatively modest one of £100 a family, and supposing we are talking about the very minimum of my hundreds of thousands—of 100,000 families. There we have £10 million of the £15 million already.

Dr. John Gilbert: It is a "guesstimate", not an estimate.

Mr. Jenkin: I freely concede that. I said, "average". There will be many that will be less and some that will be more. My hon. Friend the Member for St. Marylebone (Mr. Kenneth Baker) reminded us of the rough breakdown we were given even in 1968 of the effects of

income tax and surtax respectively. It was one of the points we made, that there would be far more income tax involved than surtax. Why did the Labour Party, when in government, hit the middle and lower income groups in this way?
Here I come to the second arm of my argument—they did it because they founded it upon a philosophy which itself is a nonsense. The hon. Member for Llanelly (Mr. Denzil Davies), in a very competent speech, sought to defend the argument of the common spending unit. These words were used by Lord Diamond in the 1968 debates and I adhere to them. The argument runs something like this: a husband and wife's incomes have been aggregated. This must be because they live in the same household. Therefore, it must be right to aggregate the incomes of children in the same household. So we concoct a sociologist's fantasy—the concept of the common spending unit. We make it clear now, as we did in 1968, that we do not accept the concept or the logic on which it is based.
In the first place, husband and wife are taxed as one as a hangover from the pre-Married Women's Property Act days. The old common law doctrine was that when a man and woman married they became one flesh and therefore it was quite natural, with a 19th century taxation system, to tax the husband on the incomes of both. We know that for over a quarter of a century the wife has enjoyed a separate earned income allowance on her own earnings. There is no aggregation there. On the contrary a wife and husband with earnings are taxed less than if all the income was the husband's.
As the Committee also knows, we recognise the logic of that in Clause 15 of the Bill and are proposing to disaggregate a wife's earnings right up the scale. We see no sense in taxing them at a higher rate than they would pay if they were single. So, where is the common spending unit? The whole trend of the 20th century has been to tax people as individuals and that is how we should treat children with income of their own. My hon. and learned Friend the Member for Nelson and Colne (Mr. Waddington) made a valid point when he asked: if a family is to be treated as a common spending unit why exclude a child's earnings? They are every bit as much


part of a family's income. They were rightly excluded, as he pointed out, because politically it was inconceivable that the Government should attempt to get away with it. Yet this conclusion utterly destroys the logic of the common spending unit.
One might ask, why not aggregate the incomes of other members of the household—grandma's pension or auntie's annuity? With the greatest respect, they are not aggregated. Why not aggregate the income of a mother living with her adult daughter as a single household and sharing expenses under one roof'? It is just as much a common spending unit as a family with children. Why not aggregate the income of a child with that of its guardian, not its parent, with whom it may be living for the whole of its childhood? This is a common spending unit and yet the Measure never applied to that.
The truth is that the concept of a common spending unit was never anything more than a cloak of respectability with which to dress up what my hon. Friend the Member for Rutland and Stamford (Mr. Kenneth Lewis) rightly called a piece of Socialist class legislation. Like so many modern garments this cloak is a "see-through" cloak which fools no one.
Least of all did it fool the majority on the Royal Commission on Taxation in 1954. In paragraph 123 of its report it said:
The majority did not accept the validity of the generalisation, on which all depends, that the income of an infant, which must be thought of as held and applied by trustees on its behalf, is never anything in substance but a part of the family income. Certainly its existence relieves the parent of some burden of expenditure, but it by no means follows that the relief to the parent is of the same magnitude as the expenditure made on behalf of the child. It would be doubtful justice therefore to attribute the whole of the child's income to the parent and leave him merely to such relief as child allowance might afford him.
With that authoritative advice of the Royal Commission, it is perhaps surprising that our predecessors felt it right to legislate in this way, but they of course relied on the minority report, whose author, as everyone knows, was Professor Kaldor.
The reality underneath this transparent cloak, the common spending unit, is that

the Clause is unfair and hits hundreds of thousands of people of modest incomes, and it is unconscionable because it hits many of them in circumstances of the greatest misfortune. Above all, it is unnecessary.
A great deal has been said about avoidance. The hon. Member for Woolwich, West, or the hon. Member for Oldham. West, said that the tax avoidance industry would start rumbling away. What on earth does he think has been happening in the last six years? Nothing has done more to boost the tax avoidance industry than six years of Socialist legislation.

Mr. Meacher: Will not the hon. Gentleman accept that the proper way is not to reduce the proper provisions of the law? One does not create a proper morality by doing away with all morality. The important thing is to decide where the tax imposition should be and to ensure that it is kept on.

Mr. Jenkin: The important thing is to take a robust and commonsense view which does a broad measure of justice and keeps the tax system simple.
There are already adequate safeguards against tax avoidance in this respect and I will number what they are, because there is same misunderstanding and some Labour Members have got it quite wrong. First, the child tax allowance reduces £ for when the child's income rises above £115. Secondly, although the child tax allowances are increased in the Bill, the figure of £115 stays the same and this means, because the C.T.A. runs for surtax as well as income tax, that the restriction of C.T.A. costs a surtax payer more than the child gains by being entitled to a separate personal allowance.
Thirdly, and here I come to a point which the hon. Member for Oldham, West had not fully hoisted on board, covenants no longer run for surtax, and, therefore, there is no loss of surtax when a grandfather covenants for a grandchild and there is only income tax up to the level of the single personal allowance, or a little above that if one takes account of the small income allowance. Fourthly, the rule that a settlement by a parent on his own children does not effect a transfer for tax purposes remains, although. of cour3e, we are reducing the age, in line with the Latey Report, to 18. In


our view, those are entirely adequate safeguards.
But I quote one more sentence from Mr. Macleod's speech in which he made the pledge, because we still firmly adhere to this:
A Government must always reserve to itself the right to deal with abuses, and, if through new uses of insurance policies or in any other way, such abuses arise, it should then consult the life offices and other interests and legislate if necessary."—[OFFICIAL REPORT, Standing Committee A, 20th May, 1968; c. 1076.]
I say finally a word about education, because many Labour Members took the view that the Clause was aimed at helping the public schools. I take my stand in exactly the same way as the Government who were our predecessors when we challenged them by saying that their Clause 15 was an attack on schools.
10.0 p.m.
The noble Lord, Lord Diamond, as he now is, said:
The right hon. Member for Enfield, West will forgive me in being forthright in my answer. The simplest thing to say is that I was present, as far as I am aware, at every one of the many discussions which went on within the Government and within the Treasury on this issue, with which I am not wholly unconnected. I have checked with the Chancellor. I have checked with the Financial Secretary. Not one of the three of us has the slightest recollection of ever hearing public schools or that issue mentioned. He is totally wrong in suggesting that it was in the front, in the middle or in the back of any one of our thoughts. I hope that the point has registered."—[OFFICIAL REPORT, Standing Committee A, 15th May, 1968; c. 885.]
I can say exactly the same for those of us concerned with this Clause.
We have had long debates and they have disclosed deep philosophic differences between the two sides of the Committee. They are unlikely to be reconciled by further debate. Clause 15 of the 1968 Bill was bitterly opposed by us when we were in opposition. We gave a clear pledge to repeal it. That we are now doing. I ask the Committee to reject the Amendments.

Mr. Taverne: As the Financial Secretary said, the Clause is controversial and gives rise to a clash of social philosophy. We are concerned with equity and fairness. The Financial Secretary has totally failed to answer the fundamental point

in a speech which was sanctimonious in tone and unsatisfactory in content.
The principle of equity in tax takes two forms. First, it is concerned to ensure that the two taxpayers who are in a similar position are not treated differently; and, if they are, then, as my hon. Friend the Member for West Lothian (Mr. Dalyell) observed, it brings the tax system into disrepute. Secondly, it is concerned to ensure that there is no undue discrimination between rich and poor.
I deal first with the aspect of equity as between different taxpayers in similar positions. The 'hon. Member for St. Marylebone (Mr. Kenneth Baker) referred to anomalies. He said that Lord Diamond, then Chief Secretary, did not move the Amendment till a later stage. Lord Diamond made it clear in Committee that he would move an Amendment and, when he said so, Mr. Macleod answered:
I am grateful for what the right hon. Gentleman has said."—[OFFICIAL REPORT, Standing Committee A, 15th May, 1968; c. 891.]
If there is a different version in the report which the Financial Secretary has, perhaps he would use the Library copy.
It is strange that the hon. Member for St. Marylebone, or indeed any other hon. Member, should refer to anomalies. There is a fundamental anomaly which will be restored to the tax system through the reintroduction of the old system by this Clause. I means that if a grandfather gives a sum of money to his son for the maintenance of the child he will be taxed more; if the grandfather gives the money direct to the grandchild, saving the father the necessity of spending the money, he will be taxed less. They are in essentially the same position but their tax burdens differ. It is irrelevant for the Financial Secretary to say, "But this does not necessarily affect surtax payers only."
The first principle is concerned with justice between two taxpayers in similar positions who bear different burdens.
I turn to the second example. What happens with maintenance orders? The vast bulk of maintenance orders are made by magistrates' courts in which there is no provision for settlement of the money on the children by a deed of trust. Payments under maintenance orders are made


in favour of the mother. Eight times as many maintenance orders are made in magistrates' courts as are made in the High Court. But the situation is different in the case of the High Court. What happens is that the solicitors get together and, justifiably, if the law provides for this loophole, matters are arranged in such a way that the order is not made in favour of the mother or father as the case may be, but in favour of the child.
Again, there is a similar situation between two taxpayers who are faced with the same problem. When this Clause is reintroduced, if it is, one will pay more tax and the other less. But there is a difference between the kind of people involved. The constituents of my hon. Friend the hon. Member for Ince (Mr. McGuire) will not go to solicitors and arrange for deeds of covenant or hearings in the High Court. The Financial Secretary said that only small figures were involved and he gave an example of an amount of £100, but in practically the next breath he contradicted himself and made the point that in the case of small settlements the child allowance would alter the position.
Special provisions are made when it comes to certain kinds of family units. They do not allow parent-child settlements to continue. There are certain cases, as my hon. Friend the Member for Llanelly (Mr. Denzil Davies) pointed out, where this does not apply and where there is no disaggregation for the earned income of the wife. They are concerned with cases where income does not go to the infants in one sense but is applied for the benefit of the infants under trust.
What the Clause will do is to spread the tax avoidance, not necessarily for the very wealthy—though in fact it will do that—but for those who can afford solicitors and who can go to the High Court, such as a grandparent who wishes to provide for the education of grandchildren. The hon. Member for Wycombe (Mr. John Hall), who is not in the Committee at the moment, said that one should not be concerned about the matter of tax avoidance if one gets at a few by penalising the many. But this is no such case. What we are doing here is to deal with a certain amount of tax avoidance and to provide equity and fairness for the many.
Another aspect is the matter of equity between rich and poor. There is no answer the Government have offered to the valid point made by the hon. Member for Oldham, West (Mr. Meacher) about what will happen in regard to social security. What Amendments are to be introduced to abolish the present conception of the family unit in that respect? At the moment, when it comes to supplementary benefit, income to a child on maintenance orders is taken into account and at the moment when it comes to rent rebates, income of the child is taken into account—in other words, it is aggregated.

Mr. Kenneth Lewis: I feel that the hon. and learned Gentleman is misleading the Committee, although I am sure he does not intend to do so. In social security terms the only thing that is disregarded is the child's part. If the child has an income, he does not need social security.

Mr. Taverne: The hon. Gentleman has made a distinction without a difference. Essentially this is a case where the total income of the family spending unit is taken into account for social security purpose.

Mr. Patrick Jenkin: This again is a point which I examined in some detail I am told that the practice is that where an infant has earnings or other income which exceed its own requirements by rather more than the normal disregard, the Supplementary Benefits Commission usually makes special adjustment under its discretionary powers so that the child is left out of account altogether, rather than having its income taken into account as against the parents' requirement.

Mr. Taverne: But what the hon. Gentleman is referring to is the case where a child has a large amount of income. But if the child only has what the child needs, the parents' social security benefit suffers accordingly and the unit is treated as one, and an entirely different standard is applied in those cases to that applied elsewhere.

Mr. Patrick Jenkin: Will the hon. and learned Gentleman give way?

Mr. Taverne: No, I am answering the point which the hon. Member put to


me. [HON. MEMBERS: "Misleading."] There is no question of any Amendment being introduced by the hon. Member or by the Government to create a situation where there is disaggregation of income, and what the child gets in these cases is disregarded, except in special circumstances, in the way in which it will now be disregarded for tax purposes.
The same applies in the case of rent rebates. It will be extremely interesting to see what happens in the case of housing allowances. This is yet one further example of the double standards which apply throughout the Bill. Exactly the same point has been made again and again from this side of the Committee, without any answer from the Government side, about the question of poverty surtax, and the question of marginal rates, which matter in the case of the surtax payer but which do not matter in the very much worse case of those who are at

the bottom of the income scale and keep far less of the extra earnings because of the means test system than those at the top of the income scale.

It is a double standard which again can be shown in the totally disproportionate amounts which are provided for poverty and which are provided in tax concessions in this case. The tax concessions in this case are £15 million to £20 million. For family income supplement, they amount to some £7 million. We were reminded by one of my hon. Friends of the pledge of the late Mr. kin Macleod to spend £30 million on family allowances. That money has gone to this kind of relief instead—[HON. MEMBERS: "Nonsense."]—and I ask my hon. Friends to vote for the Amendment.

Question put, That the Amendment be made:—

The Committee divided: Ayes 143, Noes 183.

Division No. 362.]
AYES
[10.12 p.m.


Armstrong, Ernest
Galpern, Sir Myer
Morris, Alfred (Wythenshawe)


Ashton, Joe
Garrett, W. E.
Morris, Charles R. (Openshaw)


Atkinson, Norman
Gilbert, Dr. John
Mulley, Rt. Hn. Frederick


Barnes, Michael
Gourlay, Harry
Murray, Ronald King


Barnett, Joel
Grant, George (Morpeth)
O'Halloran, Michael


Beaney, Alan
Griffiths, Will (Exchange)
O'Malley, Brian


Benn, Rt. Hn. Anthony Wedgwood
Hamilton, James (Bothwell)
Oram, Bert


Bennett, James (Glasgow, Bridgeton)
Hannan, William (G'gow, Maryhill)
Orme, Stanley


Bidwell, Sydney
Hardy, Peter
Oswald, Thomas


Blenkinsop, Arthur
Harper, Joseph
Owen, Dr. David (Plymouth, Sutton)


Boardman, H. (Leigh)
Harrison, Walter (Wakefield)
Palmer, Arthur


Booth, Albert
Hooson, Emlyn
Pardoe, John


Bradley, Tom
Houghton, Rt. Hn. Douglas
Pavitt, Laurie


Brown, Hugh D. (G'gow, Provan)
Huckfield, Leslie
Peart, Rt. Hn. Fred


Buchanan, Richard (G'gow, Sp'burn)
Hughes, Mark (Durham)
Pentland, Norman


Butler, Mrs. Joyce (Wood Green)
Hughes, Robert (Aberdeen, N.)
Perry, Ernest G.


Campbell, I. (Dunbartonshire, W.)
Hughes, Roy (Newport)
Reed, D. (Sedgefield)


Carmichael, Neil
Hunter, Adam
Roberts, Albert (Normanton)


Carter-Jones, Lewis (Eccies)
Janner, Greville
Rodgers, William (Stockton-on-Tees)


Clark, David (Colne Valley)
Jenkins, Hugh (Putney)
Roper, John


Cocks, Michael (Bristol, S.)
Jenkins, Rt. Hn. Roy (Stechford)
Rose, Paul B.


Cohen, Stanley
John, Brynmor
Ross, Rt. Hn. William (Kilmarnock)


Concannon, J. D.
Johnson, James (K'ston-on-Hull, W.)
Sheldon, Robert (Ashton-under-Lyne)


Conlan, Bernard
Johnson, Walter (Derby, S.)
Shore, Rt. Hn. Peter (Stepney)


Crawshaw, Richard
Jones, Rt. Hn. Sir EIwyn(W.Ham,S.)
Silkin, Rt. Hn. John (Deptford)


Cronin, John
Jones, Gwynoro (Carmarthen)
Silkin, Hn. S. C. (Dulwich)


Dalyell, Tam
Jones, T. Alec (Rhondda, W.)
Sillars, James


Davidson, Arthur
Kaufman, Gerald
Silverman, Julius


Davies, Denzil (Llanelly)
Kelley, Richard
Smith, John (Lanarkshire, N.)


Davies, G. Elfed (Rhondda, E.)
Kerr, Russell
Spearing, Nigel


Davies, Ifor (Gower)
Kinnock, Neil
Spriggs, Leslie


Deakins, Eric
Lambie, David
Stallard, A. W.


Dell, Rt. Hn. Edmund
Lamond, James
Steel, David


Doig, Peter
Leadbitter, Ted
Stewart, Donald (Western Isles)


Douglas, Dick (Stirlingshire, E.)
Lee, Rt. Hn. Frederick
Stoddart, David (Swindon)


Douglas-Mann, Bruce
Lewis, Ron (Carlisle)
Strang, Gavin


Duffy, A. E. P.
Lomas, Kenneth
Swain, Thomas


Edwards, Robert (Bilston)
Lyon, Alexander W. (York)
Taverne, Dick


Edwards, William (Merloneth)
McBride, Neil
Tinn, James


Ellis, Tom
McCartney, Hugh
Torney, Tom


Fisher, Mrs. Doris (B'ham, Ladywood)
McGuire, Michael
Urwin, T. W.


Fitch, Alan (Wigan)
Mackenzie, Gregor
Varley, Eric G.


Fletcher, Raymond (Ilkeston)
Meacher, Michael
Watkins, David


Fletcher, Ted (Darlington)
Mendelson, John
Weitzman, David


Foot, Michael
Milne, Edward (Blyth)
Wells, William (Walsall, N.)


Ford, Ben
Morgan, Elystan (Cardiganshire)





White, James (Glasgow, Pollok)
Wilson, Alexander (Hamilton)
TELLERS FOR THE AYES:


Willey, Rt. Hn. Frederick
Woof, Robert
Mr. William Handing and


Williams, W. T. (Warrington)

Mr. John Golding.




NOES


Adley, Robert
Green, Alan
Owen, Idris (Stockport, N.)


Atkins, Humphrey
Griffiths, Eldon (Bury St. Edmunds)
Page, Graham (Crosby)


Baker, Kenneth (St. Marylebone)
Gummer, Selwyn
Page, John (Harrow, W.)


Baker, W. H. K. (Banff)
Gurden, Harold
Parkinson, Cecil (Enfield, W.)


Beamish, Col. Sir Tufton
Hall, Miss Jean (Keighley)
Percival, Ian


Benyon, W.
Hall, John (Wycombe)
Pike, Miss Mervyn


Berry, Hn. Anthony
Hamilton, Michael (Salisbury)
Pounder, Rafton


Biffen, John
Hannam, John (Exeter)
Powell, Rt. Hn. J. Enoch


Biggs-Davison, John
Harrison, Brian (Maldon)
Price, David (Eastleigh)


Boardman, Tom (Leicester, S.W.)
Harrison, Col. Sir Harwood (Eye)
Proudfoot, Wilfred


Boscawen, Robert
Haselhurst, Alan
Pym, Rt. Hn. Francis


Bowden, Andrew
Hawkins, Paul
Redmond, Robert


Boyd-Carpenter, Rt. Hn. John
Heseltine, Michael
Reed, Laurance (Bolton, E.)


Bray, Ronald
Hicks, Robert
Rees, Peter (Dover)


Brinton, Sir Tatton
Higgins, Terence L.
Rees-Davies, W. R.


Brocklebank-Fowler, Christopher
Hiley, Joseph
Renton, Rt. Hn. Sir David


Brown, Sir Edward (Bath}
Hill, James (Southampton, Test)
Ridsdale, Julian


Bruce-Gardyne, J.
Holland, Philip
Rossi, Hugh (Hornsey)


Buchanan-Smith, Alick (Angus, N&amp;M)
Hordern, Peter
Rost, Peter


Buck, Antony
Hornsby-Smith, Rt. Hn. Dame Patricia
Russell, Sir Ronald


Bullus, Sir Eric
Howell, David (Guildford)
Shaw, Michael (Sc'b'gh &amp; Whitby)


Carlisle, Mark
Hunt, John
Simeons, Charles


Chapman, Sydney
Iremonger, T. L.
Skeet, T. H. H.


Churchill, W. S.
Irvine, Bryant Godman (Rye)
Soref, Harold


Clark, William (Surrey, E.)
Jenkin, Patrick (Woodford)
Speed, Keith


Clarke, Kenneth (Rushcliffe)
Jessel, Toby
Spence, John


Cockeram, Eric
Johnson Smith, G, (E. Grinstead)
Sproat, Iain


Cooke, Robert
Kershaw, Anthony
Stainton, Keith


Cooper, A. E.
Kilfedder, James
Stanbrook, Ivor


Cormack, Patrick
King, Evelyn (Dorset, S.)
Stewart-Smith, D. G. (Belper)


Critchley, Julian
King, Tom (Bridgwater)
Stodart, Anthony (Edinburgh, W.)


Crouch, David
Kinsey, J. R.
Stoddart-Scott, Col. Sir M.


Curran, Charles
Knight, Mrs. Jill
Stuttaford, Dr. Tom


d'Avigdor-Goldsmid, JamesMaj.-Gen.
Knox, David
Taylor, Sir Charles (Eastbourne)


Dean, Paul
Lambton, Antony
Taylor, Frank (Moss Side)


Deedes, Rt. Hn. W. F.
Legge-Bourke, Sir Harry
Taylor, Robert (Croydon, N.W.)


Dixon, Piers
Le Marchant, Spencer
Tebbit, Norman


Edwards, Nicholas (Pembroke)
Lewis, Kenneth (Rutland)
Thomas, John Stradling (Monmouth)



Luce, R. N.
Thomas, Rt. Hn. Peter (Hendon, S.)


Elliot, Capt. Walter (Carshalton)
MacArthur, Ian
Thompson, Sir Richard (Croydon, S.)


Elliott, R. W. (N'c'tle-upon-Tyne, N.
McLaren, Martin
Trafford, Dr. Anthony


Eyre, Reginald
Maclean, Sir Fitzroy
Trew, Peter


Farr, John
Macmillan, Maurice (Farnham)
Tugendhat, Christopher


Fell, Anthony
McNair-Wilson, Michael
Turton, Rt. Hn. R. H.


Fenner, Mrs. Peggy
McNair-Wilson, Patrick (NewForest)
van Straubenzee, W.


Fidler, Michael
Mather, Carol
Waddington, David


Fisher, Nigel (Surbiton)
Maude, Angus
Walder, David (Clitheroe)


Fletcher-Cooke, Charles
Maxwell-Hyslop, R. J.
Walker-Smith, Rt. Hn. Sir Derek


Fookes, Miss Janet
Meyer, Sir Anthony
Ward, Dame Irene


Fortescue, Tim
Mills, Peter (Torrington)
Warren, Kenneth


Foster, Sir John
Miscampbell, Norman
Weatherill, Bernard


Fox, Marcus
Moate, Roger
White, Roger (Gravesend)


Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Molyneaux, James
Whitelaw, Rt. Hn. William


Fry, Peter
Monks, Mrs. Connie
Wiggin, Jerry


Gilmour, Sir John (Fife, E.)
Montgomery, Fergus
Wilkinson, John


Glyn, Dr. Alan
Morgan-Giles, Rear-Adm.
Wolrige-Gordon, Patrick


Godber, Rt. Hn. J. B.
Morrison, Charles (Devizes)
Woodnutt, Mark


Goodhart, Philip
Mudd, David
Wylie, Rt. Hn. N. R.


Goodhew, Victor
Nicholls, Sir Harmar



Gorst, John
Normanton, Tom
TELLERS FOR THE NOES:


Gower, Raymond
Onslow, Cranley



Grant, Anthony (Harrow, C.)
Orr, Capt. L. P. S.
Mr. Jasper More and


Gray, Hamish
Osborn, John
Mr. Hector Monro.

Clause 10 ordered to stand part of the Bill.


To report Progress and ask leave to sit again.—[Mr. Maurice Macmillan.]


Committee report Progress; to sit again Tomorrow.

Orders of the Day — DRIVERS' HOURS (PASSENGER AND GOODS VEHICLES)

10.23 p.m.

The Under-Secretary of State for the Environment (Mr. Eldon Griffiths): I beg to move,
That the Drivers' Hours (Passenger and Goods Vehicles) (Modifications) Order, 1971, a draft of which was laid before this House on 8th April, be approved.
This Order is made by my right hon. Friend in exercise of his powers under Sections 96(12), 101 and 157 of the Transport Act, 1968. It is, I freely admit, a complicated Order, largely because the parent Act is complex; but essentially it has two main purposes.
First, for the drivers of passenger vehicles the Order revokes the Drivers' Hours (Passenger Vehicles) (Modifications) Order, 1970, and modifies substantially the requirements of Section 96 of the Act; and, secondly, for drivers of goods vehicles it extends certain exemptions, already available under the Act and under the Drivers' Hours (Goods Vehicles) (Modifications) Order, 1970, to drivers of goods vehicles used for additional types of work.
The House may remember that the 1968 Act imposed a number of extra restrictions on drivers' hours. These hours were already controlled under the Road Traffic Act, 1930, as consolidated in 1960; but, for reasons best known to right hon. and hon. Gentlemen opposite, elaborate formulae were laid down by statute defining in minute detail what was and was not permissible. It was widely predicted at the time that these formulae would be unworkable.
At the time, the right hon. Member for Blackburn (Mrs. Castle) brushed aside these warnings; but when the time came to put these restrictions into effect her successor was more cautious. As a result, the new drivers' hours, which were complicated already, finally came into force enmeshed in a further thicket of exemptions and modifications. For goods vehicle drivers there were exemptions for particular trades and businesses—for example for the carriage in the week before a bank holiday of fish, bread and milk, but not, unaccountably, for food and drink generally. It proved necessary to

add to the exemptions for freight drivers by the Drivers' Hours (Goods Vehicles) (Exemptions) (Amendment) (No. 3)Regulations 1970, and again by Part III of the present Order.
Passenger transport fared even worse. Bus drivers were now to be subject not only to a daily limit of 10 hours driving with which we agree, but to a compulsory daily rest of 11 hours, reducible to 9½,— hours once a week or, in the case of stage bus drivers, to 8½ hours three times a week, if succeeded by a rest of 12 hours; in addition, there were further restrictions on daily and weekly hours on duty; and a rest period of 24 hours once a fortnight which had to be taken from midnight to midnight.
I do not doubt for one moment the good intentions of all this. But the bus industry, as its customers and its drivers have learned to their cost, simply cannot work with formulae of this nicety. For one thing it cannot afford to. This is an industry where wages account for some 70 per cent. of total costs, and cost inflation has hit it hard. Last year the effect on the biggest single operator, the National Bus Company, of two large wage settlements, widespread industrial action, falling traffic and these restrictions on drivers' hours was an operating deficit of £4 million. The Government have had to make available £6 million of tax payers' money to keep it going.
Then again there are the practicalities of day-to-day bus operations. Traffic must be carried as and when it arises, and if from Monday to Friday the public needs its buses chiefly in the morning and evening rush hours, then staff need to be available at those hours. Similarly, if, at weekends, large numbers of people like to make an excursion by coach, for instance to football matches, or, in the case of many of the over-60's in my constituency, to the seaside, it may often need to be the stage bus driver of Monday to Friday who will drive their coach.
But in both these cases—the peak hours and the coaches—the drivers' hours rules made things difficult. Indeed, by the setting up of different rules for buses and coaches the operators' and the drivers' lives were, in some cases, made unbearably complicated.
In the circumstances of the bus industry, inflexible new regulations could have only one outcome, and that is a reduction in service to the public. I can best illustrate this with some figures from an analysis of the effects of the new provisions on a sample of 51 separate bus undertakings in all parts of the country.
Being forced to budget for a greater shortage of drivers as a result of the drivers' hours restrictions, these 51 bus companies had to make a planned reduction in their stage services of 540,000 miles per working week. Inevitably, the public suffered, but so did many drivers. By July of last year these same bus companies, many of them operating in the constituencies of hon. Gentlemen opposite, were losing a further 460,000 miles per week unplanned, simply because the regulations left insufficient drivers available. They were also losing 420,000 miles per week on excursions, tours, school contracts and private party work. The drivers' hours were largely to blame for this.
All told, these losses—resulting directly from the drivers' hours—represented a 6 per cent. drop from these 51 companies' corresponding mileage in the previous year. This was a good deal more than the annual reduction in bus operations attributable to the motor car. In one week last July, 47 per cent. of the scheduled mileage lost on this account was lost in the peak travelling periods. Many companies estimated that their loss of excursion traffic on this account was more than 50 per cent.
The bus industry cannot afford such deliberately imposed losses which, for some services, were the last straw on the camel's back. The companies were hard hit, but worse hit still were the ordinary people—our constituents.
My Department's files, like the post bags of hon. Members, bear eloquent testimony to what the lost mileage means in terms of the bus that never came, the loss of time at work, the children late home from school and, perhaps above all, the elderly folk bereft of their only means of transport. These were, and still are, the direct effect of the drivers' hours.

Mr. Leslie Huckfield: Rubbish!

Mr. Griffiths: It is not only the public and the bus companies who have suffered. The drivers have also suffered. A driver who volunteers to do an extra turn may run foul of the law. Many drivers have found the loss of voluntary overtime an undue burden on their pockets, and some have resigned because of this.
Drivers have also suffered because many operators, from a sense of public duty, have concentrated on keeping stage services running at the expense of private party and excursion work, which has always appealed to the bus driver as a pleasant variation from his daily routine work.
Such stringent, if well-intentioned, provisions could be justified only if the dictates of safety or industrial welfare made them absolutely necessary. I accept that it was the safety argument which weighed heavily with the Labour Party, and my right hon. Friend and I are totally devoted to road safety. Indeed, I believe that to be true of every hon. Member.
But well-intentioned as I accept they were, at least on road safety grounds, there is not one jot of evidence to suggest that the drivers' hours regulations have had any material effect on accidents involving public service vehicles. Research into drivers' behaviour both here and abroad has failed to produce any evidence to establish that these restrictions bring about an improvement in road safety. The evidence is to the contrary.
Obviously, it is unsafe for a driver to stay at the wheel too long. All of us who drive know that. That is precisely why we are keeping in this Order the 10-hour maximum at the wheel. There is no question whatever of relaxing the law to a point where a bus driver's hours of work could of themselves be responsible for excessive fatigue.
As for industrial welfare, it simply is not the function of legislation about drivers' hours to supplant the normal collective bargaining about conditions of service. The Order in no way derogates from the right, or the ability, of workers in the bus industry to negotiate with their employers about their hours of work, as they have previously done. The Government are proposing simply to relax and to clarify the provisions affecting drivers' hours in the interests of the


travelling public, of the bus industry itself, and, not least, of the bus drivers, too.
The chief instruments of control should be the limits on driving time, and the compulsion to provide adequate rest. We consider that hours of permissible duty as opposed to hours actually at the wheel are, in the main, better left to industrial agreements freely arrived at between men and managements.
We should have preferred, as a Government, to revise the whole concept of the statutory working day to which the Transport Act gave birth. But this would require primary legislation. We may yet come to that, but the bus industry and the travelling public cannot wait that long. For the moment, we have to act quickly, and we must, therefore, act within the powers under the 1968 Act. This circumscribes what we can do, and how we can do it. Also, it imposes a form of words in the Order which, perhaps, is less pellucid than one might wish. But there is an explanatory leaflet in draft which puts the matter in simpler language and which it is intended to circulate widely among operators and drivers. Copies of the leaflet are available in the Vote Office.
I come now to the Order itself. I emphasise that nothing in it alters the daily limit of driving time. The Labour Government decided that 10 hours per day at the wheel was the appropriate limit. We agree, and we are keeping it.
Part I is formal. Part II deals with drivers of passenger vehicles. Article 3 revokes the Drivers' Hours (Passenger Vehicles) Order 1970. Article 4(1) defines the drivers to whom this Part of the Order applies. These are the drivers who spend all, or the greater part, of their relevant driving time driving passenger vehicles, and no distinction is made between drivers of stage buses and others, which, I believe, is an important simplification.
Article 4(2) prescribes the maximum period of driving, that is, 5½ hours, which is permissible without a rest break of at least half an hour. It provides also that a driver may work a "straight-through shift" of 8½ hours provided that he has rest breaks during that time amounting to at least 45 minutes. Under the Order, a driver will be able to undertake an-

other spell of driving within his daily limit of 10 hours after he has completed his straight-through shift and after he has taken a rest break of at least a further 30 minutes, which must follow it.
The importance of this relaxation to the bus industry and to the public is considerable. It will help the industry to cope much better, in particular, with the unexpected and emergency situation in which, at the moment, the absence or lack of a driver for reasons of the hours restriction can lead to buses simply not being forthcoming. It will very much help with peak hours. It will facilitate late evening working, ensuring that buses are available for the public, and ensuring, too, a spot of overtime for the bus men, which at present they are precluded from earning by the drivers' hours.

Mr. Leslie Huckfield: How can the hon. Gentleman stop it?

Mr. Griffiths: The hon. Gentleman asks how it is to be stopped. There is a statutory limit of 10 hours driving time, as there is at present.

Mr. Huckfield: How does one enforce it?

Mr. Griffiths: The hon. Gentleman is a better expert at breaking the law than I am.
This does not mean, and it cannot mean, that drivers will be allowed to drive for 16 hours. It means only that the period within which they may do their driving is spread over a longer period. This spread-over limit has been set wide in order to allow flexibility for manning the early morning peaks and the late evening services.
A 16-hour spread-over is not new. It was allowed to certain coach drivers a number of times each week by the right hon. Gentleman under his March, 1970, Order. He brought it in, quite rightly, to facilitate the operation of extended tours and long-day excursions. We accept his reasons for doing so but it is now necessary to apply it across a wider range. The Order extends his logic to the rest of the bus industry.
But I must make it clear that the 16-hour spread-over will have to contain or allow at least six hours of non-driving time. During this time, the driver will normally have his rest and refreshment or


be off duty altogether. Nor is it possible for a 16-hour day to be repeated day after day. This is not practicable because the nightly rest requirement, normally of 10 and occasionally of 8½ hours, would oblige the driver to start later each day.
To sum up paragraph (3), which I accept is complicated, the 16-hour maximum spread-over defines the scope within which daily working schedules can be arranged between employers and employees.
I turn to paragraph (4). This prescribes a daily rest between working days of at least 10 hours, which may be reduced to 8½ hours but not more than three times per week. Again, the 8½-hour rest period is no novelty. It was brought in by the last Government in their March, 1970, Order, though in this case it had to be followed, on each occasion, by a 12-hour rest. But it is the fact and the record that the rigid alternation of 8½ hours rest and the 12-hour rest, imposed by that Order, brought disruption into the schedules of the industry and it was the cause of many a bus in the early morning peak hours failing to set off for lack of a driver. We are, therefore, substituting a more flexible provision which will remove one of 'the main causes of irregular running, and ease, in particular, the irregularity of buses during the morning peaks and the non-appearance of buses during the evening peaks.
Paragraph (5) removes the limit on duty hours for the week—a difficult thing which gave the industry a great deal of trouble in keeping tally. Paragraph (6) provides that a driver must have at least one continuous period of 24 hours off duty in every two successive weeks, which in practice means every alternate week.
Hon. Gentlemen opposite will no doubt take notice that this is in substance what the 1968 Act originally provided. It came into force under the March, 1970, Order which provided that the 24-hour period should comprise a full day. Again the result was to aggravate the scheduling difficulties of the operators. There is abundant evidence to show that the running of services, especially on Sundays, was badly affected by these rigid rest-day provisions.
Paragraph (7) provides certain exemptions for part-time drivers. The complexity of this paragraph is, I am afraid, due to the structure of the original Act. Essentially it means that people whose driving time exceeds four hours a day on not more than two days a week are required to comply with requirements affecting drivers' hours only in respect of those particular days. This concession will facilitate the use, by agreement between men and management, of part-time drivers from among other employees of the same bus operator.
For instance, if an operator wants a driver for a weekend coach, instead of having to recruit him from outside the firm in the case where all of his regular drivers have used up their permissible hours, he will now be able to recruit that extra driver from among volunteers in his own garage or maintenance staff. The result should be some useful increases in productivity and of convenience to the public. The employees will gain, too. In particular this arrangement will help in getting increasing agreement to the five-day week.
I come now to Part III of this Order. This provides for minor concessions for goods vehicle drivers engaged in cinematography, radio or television broadcasting and quarrying work. The background to this, as is the case with the buses, is that the original drivers' hours legislation was, for most practical purposes, unworkable. It imposed on the road haulage industry a straitjacket out of which both hauliers and drivers have ever since been trying to struggle. A general exemption from all but the daily 10-hour driving limits was provided by the Drivers' Hours (Goods Vehicles) (Modifications) Order, 1970 for persons driving light goods vehicles for certain specialised purposes.
Article 5(a) of Part III of this Order extends the 1970 Order to cover film operators and broadcasting staff. In practice it makes it possible for the B.B.C. or I.T.V., if they have taken film in one part of the country, to be able to get it to their studios without the difficulties imposed by the drivers' hours. The 1970 Order also extended to drivers engaged in building, construction and civil engineering work, the exemption already provided by Section 9(9) of the Act, whereby time spent driving off the public road in the course of agricultural


and forestry operations is not counted as "driving" for the purposes of the Act.
Article 5(b) of Part III now extends this exemption to drivers engaged in quarrying operations. In practical terms it means that a driver to whom this concession applies will not be subject to drivers' hours restrictions on the site of his quarrying operations unless on any one day he also spends more than four hours at the wheel of a vehicle on the road.
I have said that this is a complicated Order and its complexity arises from the complexity of the parent legislation. We would have preferred to start again from scratch but, unfortunately, we must make progress quickly and therefore we are bound by the complexities of the Orders with which we must deal. I do not pretend for one moment that the effect of this Order is to reduce the law on drivers' hours to simplicity itself. What we are trying to do is to take the spoke out of the wheel of the bus industry. Drivers' hours put a spoke in the industry's wheel and we think that the time has come to give help where it is needed —to help the operator, the drivers and, above all, to help the travelling public, our constituents.

10.50 p.m.

Mr. Tom Bradley: The last time an Order relating to these matters was debated in the House, in February, 1970, many hon. Members, on both sides of the House, referred to their difficulty in understanding what it was about. Indeed, the hon. Member for Crosby (Mr. Graham Page) referred to it as a complex and unintelligible matter, and if he thought that, there is not much hope for the rest of us.
I cannot say that the issue before us this evening is any less complicated. I am grateful to the Under-Secretary for his patient if sometimes belligerent explanation of what we are now discussing, but he has not allayed all my anxieties. Indeed, he was so belligerent at times about the effect of the Order introduced by my right hon. Friend more than a year ago that I am a little puzzled about why he and his hon. Friends did not divide the House against it at that time.
However, we note what he had to say tonight about the shortcomings of the bus industry. He contrived to place the

blame for its shortcoming on the Order now in force. But there are many instances where the shortcomings could be attributed to the antiquated licensing laws rather than to the current Order.
In Leicester, for example, there are areas where the city boundary ended before the war and where the city bus undertaking is now unable to provide a service because the Midland Red Bus Company has the operating rights. Although the city bus transport undertaking is much better able to provide an adequate and more reliable service, it is prevented from doing so not by the existence of the Order which the Under-Secretary condemns, but by the antiquated licensing system.
Many of the difficulties in the level of bus service operations in the country could be overcome by more intelligent transport planning and manning operations. I refer the hon. Member to London Transport. There is no shortage of staff, and successful single manning on certain buses has been introduced. There is an excellent training scheme by which conductors over a period are prepared to take on the responsibilities of a driver, should the situation demand it. London Transport has produced a record surplus on its balance sheet. Before the hon. Member makes these sweeping accusations against the Order which he seeks to replace, he should consider some of these ancillary matters which refer to the standards of management and administration of various bus companies, including private companies.
We are talking about an industry with comparatively low wages paid for very long hours on duty. This is a matter in which a proper balance should be struck between the operators, drivers and the interests of the public. The Under-Secretary mentioned the explanatory leaflet which is available in the Vote Office. I have noticed its preamble with interest. It says:
These rules lay down the number of hours which drivers of passenger vehicles may drive, and the rest periods which they must take; and are meant to protect drivers and public alike from the risks of fatigue …
When I read that, I thought that the word "protect" should be replaced by the phrase "put at risk", meaning that safety considerations were put at risk.
The proposals which the Under-Secretary has outlined almost without exception will have the effect of putting the clock back 34 to 40 years.
I will quote a number of examples in respect of which I believe retrograde features are being introduced. Take the question of the breaks for rest and refreshment. It is proposed that we revert to a break period after 5½ hours driving rather than 5½ hours on duty. Modern driving is not altogether an enjoyable experience. It is rather a hazardous, nerve-racking business. Surely, given the stresses associated with today's driving conditions, this provision constitutes a danger to the health of drivers and increases their level of tiredness at the wheel.
Then there is the question of rest between working days. At present, as the Minister explained, it is 11 hours, except that stage carriage drivers can make do with 8½ hours, but they must have 12 hours in their next following rest period. Now the requirement is to be only 10 hours. This may be reduced to 8½ hours on three occasions during the working week without the pattern of an alternating 12-hour rest. It is bad enough to reduce it from 11 to 10 hours, but to take out the alternating provision shows a complete disregard of the drivers and of the interests of the public.
Next there is the question of the working day spread-over arrangements. I concede at once that this is a most complicated matter. At present this is 14 hours a day, providing the driver is off duty for periods adding up to the time by which the working day exceeds 11 hours. It is proposed that we should have a 16-hour day with no limitations. Why has the Minister considered it desirable to drop the requirement of specific rest periods? This is a most dangerous and unjustifiable provision. It worsens the situation which existed in 1930.
Coach drivers must have adequate rest periods at given intervals which are legally enforceable if they are to combat fatigue and maintain the driving standards which the public is entitled to expect.

Sir Harmar Nicholls: rose—

Mr. Bradley: Many hon. Members wish to speak. I regret that, in view of

the limited time available, I cannot give way.
Limits should be laid down as to the amount of driving permitted and the maximum working day to cover morning and evening peak periods. Previously the compulsory rest day helped to limit the effect of the spread-overs, but this feature is to be abolished. Now, with the increase to 16 hours, drivers can be scheduled to work seven days a week by the use of what are called "swing shifts", made possible by the 8½ hour rest period to which I have referred.
I turn to one of the most incredible propositions before us, namely, that straight-through shifts, at present confined to 8½ hours, can be considered to be no longer the only work shift of the day. In other words, a further period of driving after that can be undertaken. Again, we are going back 34 years, for this proposal, as the Minister must know, goes beyond the amendment made in 1937 to the 1930 Act. I remind him that the trade unions interested and involved in this matter at that time agreed to the 81 hour straight-through arrangement only on the understanding that it would be applied to stage carriage scheduled work designed to achieve the greatest possible efficiency.
I come to the arrangements for time on duty in any working week. At present 72 hours a week are permissible, but no more than 132 hours in any consecutive weeks. In future there is to be no limit at all. 'This is a drastic and dangerous proposal when seen against what is being done in almost every other country in the world.
Why are we trailing behind Europe in this matter? I confess to having a personal interest since I am a passionate advocate of the cause of this country to enter Europe and all the commitments that stern from it. I should like to remind the House that after 1st October this year, under new E.E.C. regulations, the driving limit in the Community will be 48 hours. Our limit at the moment is 72 hours, and will be unlimited in future.
Does the right hon. and learned Gentleman the Chancellor of the Duchy of Lancaster, who is now in Brussels, know what his hon. Friend the Under-Secretary is advocating in introducing this Order? We have one Minister in


Brussels trying—very properly in my view —to get us into Europe and at the same time we have another Minister in this House tonight trying to take us as far away from the arrangements in force in Europe as we can possibly go. It is incredible that the Chancellor of the Duchy should be taking part in an all-night meeting in Brussels tonight when his hon. Friend is advocating in this House an arrangement that may mean all-night driving for the drivers in this country when this Order comes into force —not one night but every night of the week, since the provision is unlimited in content and character.
I hope that if the Minister is given leave to reply to this debate, he will deal with the point in the European context. I would hate this country to move away from European standards.

Sir Harmar Nicholls: rose—

Mr. Bradley: We know that the hon. Member for Peterborough (Sir H. Nicholls) is a passionate anti-European and I do not propose, in the privileged position in which I find myself tonight, to give way to him to enable him to make an anti-European point.
To sum up on the Order, these proposals are not intelligent or in keeping with civilised standards. They are short sighted, dangerous and verge on the irresponsible and they are certainly contemptuous of safety considerations. They show little appreciation of the difficulties involved in manning and maintaining public services.
The plain fact is that in future drivers will he on duty for longer hours than at any time during the last 34 years. Yet during that time traffic congestion has increased, speed limits are being raised, bigger and more powerful vehicles are coming on to our roads. And this is the moment the Minister has chosen to put into force this retrograde Order. Fatigue at the wheel constitutes a bigger danger than ever before. If the Minister doubts this, let him ask the motor organisations and the Road Research Laboratory.
There is in the Order no protection for the public against the part-time worker in the number of hours he can work or provision for records to be kept. In my view this Order is a naked concession by the Conservative Party to pressure from

the passenger road transport industry. It is an affront to commensense and I must ask my hon. Friends to divide against it.

11.4 p.m.

Mr. Marcus Fox: The hon. Member for Leicester, North-East (Mr. Bradley) surprised me in his condemnation of my hon. Friend the Under-Secretary of State, because I thought that, if anything, he was not belligerent enough. I wondered on behalf of whom the hon. Member was in fact speaking. He certainly was not speaking for the drivers whom I meet.

Mr. Joseph Ashton: I do not wish to be rude to the hon. Gentleman, but I would ask him to declare an interest in this industry, if in fact he has one to declare.

Mr. Fox: I had the feeling that that was the question. I am delighted to assure the House that I have no financial interest in the matter.
I have spent more time in this industry than has the hon. Member for Nuneaton (Mr. Leslie Huckfield)—and that would not be difficult.

Mr. Leslie Huckfield: The hon. Gentleman knows nothing about it.

Mr. Fox: In support of the modifications put to the House, I say that one year is long enough to have suffered the implications of the 1968 Act perpetrated upon the industry on 15th March, 1970. I notice that the hon. Member for Manchester, Blackley (Mr. Rose) and the hon. Member for Nuneaton have put Questions about the failure of the bus industry in their constituencies. I should have thought that they would listen with great interest to the debate.

Mr. Leslie Huckfield: That is why we are here.

Mr. Fox: The hon. Member for Nuneaton mentioned enforcement. What a cheek he has. The Act introduced by the right hon. Lady the Member for Blackburn (Mrs. Castle) has been unenforceable, as everyone will confirm. I am delighted to support a first move to bring sense into this industry.
The hon. Member for Leicester, North-East mentioned antiquated licensing laws. I hope that my hon. Friend has taken note of that, because I look forward to


taking part in that debate. I am delighted that the hon. Gentleman mentioned low wages. Many drivers have asked me to bring this matter forward so that they can earn more money.

Mr. Leslie Huckfield: rose—

Mr. Fox: The hon. Gentleman will have plenty of time if he is lucky, and he must learn to listen.
The hon. Member for Leicester, North-East also mentioned breaks for refreshment as if we were doing something disgraceful. I suggest that he looks at the pamphlet giving exemptions to the 1968 Act. He would see that we are doing no worse than was allowed under those exemptions.
On the spread-over provision, the hon. Gentleman is obviously unaware of the modifications made already. In support of this, I quote from the White Paper "Public Transport and Traffic", a fascinating document. The right hon. Lady is aware that we are only carrying out what was suggested after one year of operation.
At Page 24 the White Paper states:
The Government naturally has no desire to introduce changes which will result in serious inconvenience if not actual hardship to the travelling public. On the other hand the existing hours of work are unreasonably long in relation to vehicles carrying large numbers of members of the public. The Government considers that it is necessary to achieve in the bus industry conformity with the new rules at the earliest possible date. However, in determining when it is possible for the new rules to be introduced the Government will have to have full regard to the ability of the bus industry to provide adequate services for the travelling public.
We need no further justification than what is contained in that White Paper. What we are proposing will bring back viability to many bus companies which are at present in dire straits.
My hon. Friend mentioned the National Bus Company. I am more concerned with many dozens of smaller bus companies. [HON. MEMBERS: "Hear, hear."] I welcome the support of hon. Members opposite. I look forward to their support on the Order.
The only reasonable objections are on the ground of safety. I am told—and the figures prove this—that the Act does not improve matters because this industry has a very good record for road safety. To obtain a P.S.V. licence one

has to be a very good driver. A licence is not obtained easily. Likewise, any operator who drives his men and machinery to the sort of limits suggested by the hon. Member for Leicester, North-East is a fool, and it is impossible to legislate for such people. If they are prepared to break the law, they will break it. What we must do is see to it that we have sensible laws which can be enforced.
I welcome the simplification behind these modifications. They bring sense—[Interruption]. The hon. Member for Nuneaton laughs. Let us look at one or two examples. Let us consider the maximum hours of duty before a half-hour break must be taken. Under the existing law, a driver on express, contract or excursion can do 5½ hours. But the driver of a stage carriage vehicle may go straight through an eight-hour day, with a maximum of 7 hours 20 minutes of driving. Despite what the hon. Gentleman says, it is more arduous driving a stage carriage vehicle in one of our cities than driving on an express journey. Motorways present no great problems to drivers of this calibre.

Mr. Leslie Huckfield: Nonsense.

Mr. Fox: Obviously I have a higher opinion of drivers who hold P.S.V. licences than has the hon. Member for Nuneaton.
There is one distinction, and it concerns the maximum length of the working day. It is 12½ hours under the old law. That may be extended to 14 hours. The minimum rest between working days is different for the three types of drivers. Only a Labour Government could have produced legislation like it. If rest is necessary, it is necessary.

Mr. Ernie Money: Does my hon. Friend agree that nothing is more likely to bring the law into disrepute than the complexity of the law on this subject, which results in numbers of respectable people being hauled before magistrates' courts?

Mr. Fox: As usual, my hon. Friend is quite right. However, I wish to hear the arguments of hon. Members opposite, so I shall conclude my remarks by saying that I support contention that the Government have no intention of extending the 10 hours' maximum driving period. No one would propose changing


that. But when it comes to deciding who is to drive beyond the permitted number of working hours in a week, whose is the choice? Are we to believe that the unions are so helpless that they cannot control agreements? I thought that there were such things as schedules. I thought that 42 hours was the normal working week, and that schedules were drawn up between the unions and the managements of bus companies. Overtime, then, is optional. We want to bring back to the industry the right of companies to operate efficiently and to use their labour to the maximum.
I have news for hon. Gentlemen opposite. They are flogging a dead horse. The travelling public is behind the Government on these proposals. Everyone who works in the industry will support them as well.

11.14 p.m.

Mr. Ron Lewis: Unlike the hon. Member for Shipley (Mr. Fox), I do not intend to lecture the House at this late hour. Again unlike the hon. Gentleman, I wish to declare my interest, since I wish to put before the House the interests of those who are engaged in the industry.
I am a member of the National Union of Railwaymen, which has a large number of busmen in its branches up and down the country. The executive committee of the union is composed of railway men and ordinary busmen. That committee has reached a decision on this matter, and I am sure that it has been taken carefully.
I wish to state quite simply the views of my union on this issue. We think that the proposals are short-sighted, irresponsible and dangerous. The new regulations, if proceeded with, will permit drivers to be on duty for longer periods than during the last 35 years. The volume of traffic on the roads and the driving conditions today have changed beyond recognition. The number of fatal accidents in this country is already much too high. The proposals will, in our view, as a responsible union, be bound to increase the number of fatal accidents.
Speed limits are being raised, traffic congestion everywhere is increasing, vehicles are bigger and more powerful, and one important aspect, to which my

hon. Friend the Member for Leicester, North-East (Mr. Bradley) referred, is fatigue. We hold the view that fatigue is a bigger danger than ever before.
The motoring and road safety organisations will certainly confirm this view. An enormous amount of time and money is spent every year by these organisations in an endeavour to make roads safer. The Minister's contribution will make it legal for drivers to be scheduled to work longer hours than ever before. If so, it is inevitable that accidents due to fatigue will increase. If only one death can be attributed to these proposals, which extend driving hours and reduce rest periods, then it is not the Minister alone, but the whole Government which should be indicted.
My union—a responsible union—is conscious of its duty to the general public as well as to its driver members—

Colonel Sir Tufton Beamish: Read it carefully.

Mr. Lewis: —and we have no wish to see either of them placed at risk. Despite the hon. and gallant Gentleman's interjection, we look upon this as a serious aspect and beg the Government not to proceed along this line, because they will increase death on the roads.

11.19 p.m.

Mr. Peter Mills: I am amazed by what has just been said by the hon. Member for Carlisle (Mr. Ron Lewis). My information, from speaking to drivers, I admit in rural areas, is that they do not follow the line which he has just taken. In fact, both bus and lorry drivers in rural areas, who cart much of our food to London and other markets from the South-West, tell an entirely different tale from what the hon. Gentleman has told us. This leads me to think that the union which he represents is not in touch with the men driving at the wheel.

Mr. Ron Lewis: I assure the hon. Gentleman that we have on our executive committee a busman member from Plymouth, the area represented by the hon. Gentleman.

Mr. Mills: I represent not Plymouth but Torrington, one of the most famous constituencies in the country, which is several miles away. Lorry and bus drivers would not say these things to me


unless they meant them: the hon. Gentleman is out of touch with what they want.
Most of us who represent rural constituencies particularly in the South-West, know the chronic position of most small bus operators. Anything we can do to help will benefit them and those who live in the remote areas. I do not think that the Labour Party realise the problems. This relaxation will certainly help. Bus companies have suffered considerably over the last five or six years from the Transport Act and fuel taxation and a host of other impositions of the Labour Party, and this has been one more burden.
Although safety is a tremendously important factor—

Mr. Leslie Huckfield: The most important.

Mr. Mills: If the hon. Member wishes to intervene, I will give way, but he sits there, bearded and with a large tie, which does not help—

Mr. Huckfield: indicated dissent.

Mr. Mills: No, all he can do is mutter and moan from a sitting position.
These small bus companies have suffered for a long time. It is only when they are viable and making a profit that they can carry out the safety regulations which are necessary. Unless rural companies are profitable they will go on with their old worn-out buses. Not just taxation but the drivers' hours rules have hindered their profitability.

Sir T. Beamish: My hon. Friend has spoken about the disadvantage of these unnecessary restrictions on drivers' hours to small bus companies. But we are talking about bus companies across the country, including the nationalised bus companies which serve large rural areas and which have suffered gravely under these restrictions.

Mr. Mills: I agree, but I was confining my remarks to the small rural bus companies. Other hon. Members can mention the national bus companies. In my part of the world, the small operators have suffered considerably under the Administration of the Labour Party. The Labour Party forget the hard core of people in the remoter areas who find it difficult to get into the towns. Bus ser-

vices have deteriorated very considerably over the last five or six years. One of the reasons is drivers' hours, in addition to the other problems which arose because of a Socialist Government. These are the facts. One has only to ask the people in the countryside. Most of them know the reasons.
I am always amazed at the mania of hon. Members opposite to impose more and more regulations, to tie it all up, to impose the sort of idea that "Whitehall knows best" and that can dictate these things. It is time that we on this side looked at all the regulations and Acts—in transport or anything else—to see what we can prune and cut out. My hon. Friend the Minister has tonight taken a very worthwhile step in bringing forward the Order.
Safety is important, but we must be practical.

Mr. James Hamilton: The hon. Member said that profits come before safety.

Mr. bills: Yes, and I say that we must be practical as well.

Mr. Hamilton: Is the hon. Member putting forward the view of the Government that profits come before the safety of the drivers and the industry?

Mr. Mills: The hon. Member will not put words into my mouth. He will certainly not get me to say things which will be put into HANSARD in the way he has put them. I am saying that safety is absolutely vital, but both can go together. We must be practical about these matters.
I should like to give a practical illustration of what happens in the South-West and how difficult it has been for small rural bus operators to operate. Take a market bus, setting off in the morning from a town. Off we go towards market. There is considerable delay when we arrive at the market, because a lot of people want to return by bus. They have been busy about their various jobs, doing a deal here and a deal there. It is a fine thing if the bus driver suddenly says, "I cannot go on. My time is up. I cannot drive you back."
There should be flexibility in these things. This comes back to the question of practicality. I do not think that the


Labour Party, with their mania for rigid regulations, know anything about it. Tonight, we have another step forward in looking at these things and seeing what is practical. I welcome what my hon. Friend the Minister said. Heaven help the small bus companies, the rural bus operators, if the Labour Party had been in power for another five years. We in the South-West would not have had any more buses. The future would be very dim for the people if we had the sort of rigid, doctrinaire policy that lion. Members opposite always seek to promote.
I welcome the Order. I hope that it is only the first stage but that we shall have other stages in what I call bringing some practical knowledge into these matters.

Several Hon. Members: rose—

Mr. Speaker: Order. This debate must end at about 10 minutes to twelve. I think that the Minister would like to reply, and he does not need to ask leave, at about 20 minutes to twelve. I hope, therefore, that those who catch my eye will bear that time limit in mind.

11.29 p.m.

Mr. Leslie Huckfield: I am grateful for this opportunity to speak. I certainly would not wish to pursue the hon. Member for Torrington (Mr. Peter Mills) into the high jinks, milk floats and tied cottages of the South-West. I would like to talk about the serious problems which have been presented to the bus industry and the road haulage industry, which will certainly not be eased by Orders of this sort.
I could not help thinking that the lion. Member for Torrington was moving towards the famous Belgian road haulage drivers' regulations which existed at one time whereby a Belgian lorry driver was allowed to drive provided that he did not do more than 1,200 hours in six months. If this is the kind of regulation—or lack of regulation—which the hon. Gentleman proposes I can only say that it is in keeping with the sort of pleadings we have had in the past from hon. Gentlemen opposite who come from the South-West. It was Tory Members of the House who, when they were in Opposition, claimed that Cornish lorry drivers must drive 12 hours non-stop or else the whole of the Cornish fishing industry

would grind to a halt. That is the kind of argument we have heard before, the kind of argument for sending children under 14 down the pits. [HON. MEMBERS: "Oh!"] Exactly the same kind of degenerate argument. I am glad that I have provoked hon. Gentlemen opposite. Why should we not go further? If they want to get rid of some of these rules and regulations, why not get rid of the Factories Acts as well? Let them go all the way.
We are talking of a situation where flexibility too often means drivers are dragged out of bed. I am sick and tired of seeing a situation in which flexibility in this industry comes at the expense of the drivers. The hon. Gentleman gave the game away. He said, "O.K., we have to worry a bit about safety, but it is profits which come first."

Mr. Peter Mills: I did not.

Mr. Huckfield: That is the purpose of the Order.

Mr. Mills: rose—

Mr. Huckfield: The hon. Member does not like what I am saying.
The Under-Secretary has been talking about various regulations and rules when he knows quite well he cannot enforce even the present rules and regulations. It is no good coming to this House and saying these drivers can have a spread-over of 16 hours a day when he knows quite well that he can do nothing at all to stop them from driving 16 hours a day. He is in an impossible situation in coming here with proposals for so-called regulation of drivers' hours when he does not talk about enforcement machinery or provisions such as, for example, overnight accommodation. These considerations cannot be taken separately, although the Under-Secretary tries to do so. There may be a case for more flexibility, but it is no good putting forward proposals of this kind unless we have machinery for enforcement. He must know well that these proposals cannot be enforced, and he is in an impossible situation because of his ignorance of the situation which exists at the moment.
When the Industrial Relations Bill is going through another place he has the temerity to say that it is far better to have collective bargaining. He actually


thinks we shall have an increase in trade union activity under the Industrial Relations Bill. I am sorry to disappoint him, but we are talking about an industry which is not intensively unionised, and which is without sufficient statutory protection for the drivers. We shall find more pirates on the roads, we shall find more "sharp" operators, and for drivers and others there will be more hazards on the roads—far less safety. That will be the effect of a statutory Order like this.
The hon. Gentleman says we have to have more flexibility for the construction and quarrying industry. He should know that tippers—and those are the people we are talking about when we talk about this Part of the Order—are some of the biggest pirates on the roads. Yet the hon. Gentleman proposes to give them even more flexibility.
I wish the Minister had come forward with some proposals which were relevant to the needs of the industry, and certainly to the needs of the drivers. When the rules were last tightened up to keep drivers' hours down, some bus companies in my constituency started charging the same prices; they built a price ring. We had a situation in which what was not even legal under the old regulations suddenly became very illegal under the new ones. For this reason bus operators in many parts of the country put up their charges, and then blamed the Labour Government and the drivers' hours regulations. But, in fact, they had not even been sticking to the old drivers' hours regulations. I hope the Minister will do some more serious research.
This industry still depends on an 11-hour standard working day. Most of my constituents who work in Coventry factories would not even consider working hours of that kind, but bus and lorry drivers are expected to work them.
For this and many other reasons, I urge the Minister to look into the real needs of the industry. Certainly he must protect the public, but, above all, he must protect the driver who, under this legislation, will find himself in the sort of conditions that existed in the 'thirties. This is perhaps where the Conservative Party belongs.

Several Hon. Members: rose—

Mr. Speaker: I said earlier that this debate had to conclude at 11.50 p.m. In fact, it must finish at 11.53, and since the Minister would, I know, like to begin his reply at 11.43, there are now five or six minutes left for debate. Mr. Blaker.

11.37 p.m.

Mr. Peter Blaker: I, too, congratulate the Minister on having brought forward this Instrument and for making it effective from the 29th of this month, which is just before the Spring bank holiday.
The effect of last years' Socialist legislation on holiday business has been extremely serious. [Interruption.] It is obvious from the remarks of hon. Gentlemen opposite that, despite the evidence to show the marked effect it has had on holiday business, if they were still in office they would have done nothing about the matter.
The effect of this on the holiday business in my constituency has been dramatic. People have not been coming to my area in the numbers they used to come by coach for day trips, and this must be true for most areas as it is for Blackpool. Apart from coach trips costing more, the Socialist legislation was so badly drafted that coaches must return many hours earlier than used to be the case.

Mr. Leslie Huckfield: Oh, dear!

Mr. Paul B. Rose: rose—

Mr. Blaker: I will not give way. I want the hon. Gentleman and his colleagues to realise just what their legislation has been doing. They are obviously totally ignorant of the bad effect it has been having.
Some statistics from my constituency illustrate the situation. One theatre which in 1969 had 102 coach parties during the summer season had, in 1970, as a result of that Labour legislation, 43 such parties.

Mr. Rose: What utter rubbish.

Mr. Blaker: I have a letter from a gift shop saying that there was a 25 per cent. drop in business last year because of this legislation—[Interruption.]—and a catering establishment reported a 50


per cent. drop in business during evenings in the summer season.
To what avail have people suffered in this way? There has been no improvement in road safety. The Minister made that clear. Drivers do not like the regulations, and what has been the reaction of people who like to take day trips by coach to Blackpool from, say Manchester? How would hon. Gentlemen opposite feel if they were told by their coach driver, "I am very sorry, but you must go home at five o'clock instead of nine o'clock, as in the past?" If hon. Members opposite think that they understand the common man, they should have another think.

11.40 p.m.

Mr. Peter Doig: Every provision in the Order increases the number of hours that drivers are permitted to work, reduces their rest periods, or abolishes the total maximum number of hours which they can work. Each one of those changes will inevitably lead to increased fatigue on the part of drivers.
Every day in this country there are 1,000 people killed or seriously injured on our roads—it remains one of our most urgent problems—yet here we have an Order which makes the position worse. The strain on drivers is increasing all the time. On the one-man bus, for example, the driver not only has to watch the traffic but he has to watch the money. He never has a minute of relaxation all day because he is either driving or watching the passengers to see that they pay their fares as they board the bus.
If drivers work 16 hours in a 24-hour period—in London it takes roughly an hour to go to work and an hour to go home again—how much sleep will these men have, and how safe will they be the following day if they are on another 16-hour spread-over period? Obviously, the Order will increase accidents.
After the measures taken under the Labour Government's Transport Act, the number of accidents fell for the first time. Hon. Members do not mention that. The results prove that we were successful for the first time in many years in reducing accidents.

Sir Harmar Nicholls: What evidence?

Mr. Doig: Yes, there is evidence. Under the relaxations since, however,

accidents are starting to increase again, and they will continue to increase under the Order. This is a serious business. I am sorry that there is not more time to debate it. Hon. Members opposite always think about drivers working on a nice sunny day. It is not always like that. What about the winter when there is ice on the road and there are other additional strains? The drastic increase in accident hazard which is bound to come ought to make the Government think again, but, apparently, they just ignore the seriousness of the problem.

11.42 p.m.

Mr. Eldon Griffiths: The Opposition's attitude to the Order is astounding. They pushed the bus industry into a crisis. They now go stumping round the country trying to make political capital out of the sufferings of ordinary people which arose from their own incompetence. When the Government try to undo the damage which they did and put matters to rights, they have the temerity, the sheer bare-faced audacity, to complain.

Mr. Frederick Mulley: If the hon. Gentleman's proposition is that the industry cannot run unless drivers work for more than 72 hours in a week or 132 hours in a fortnight, will he tell us whether exemption from the E.E.C. regulation of 48 hours is a condition precedent to our accepting admission to the Community?

Mr. Griffiths: I shall deal with the point regarding Europe. The hon. Member for Leicester, North-East (Mr. Bradley) talked about the licensing laws, about London Transport, about administration and about wages, but the one thing he never said a word about was the convenience of the British public.
As regards Europe, the answer is that throughout Western Europe there is no Community regulation whatever on drivers' hours' in respect of regular bus journeys under 50 kilometres.
I resent the irresponsible suggestion from hon. Members opposite that this or any other British Government will put safety on the roads at risk. I have looked into this matter very carefully. The Road Research Laboratory has carried out on our behalf a close scrutiny of all the evidence available on bus and coach accidents, and there is no positive information that the Laboratory can obtain


that links the accident rate with the hours that the man spends at the wheel. I will tell the hon. Member for Dundee, West (Mr. Doig) the record. From March to August, 1969, before the introduction of the drivers' hours restrictions, 821 public service vehicles were involved in injury accidents for every 100 million vehicle miles. For the same period of 1970, immediately after the new restrictions were introduced, that figure was higher. It went up to 835 per 100 million vehicle miles. To put it another way round, in 1969, from March to August, the industry ran nearly 122,000 vehicle miles per injury accident and in 1970 this figure was under 120,000 That disposes of the safety argument.
What does the industry say? It has a good record on safety. All four associations, representing almost all the buses on the road, have given the Government the undertaking that they have no intention of trying to use these revised regulations to impose unacceptable or unduly onerous duties on their employees or jeopardise the safety record of the industry.

Mr. Leslie Huckfield: Does the hon. Gentleman believe them?

Mr. Griffiths: I do, because I believe that the associations are responsible people, which is more than I can say of hon. Members opposite. I want to give two examples of this in practice. Suppose a driver falls sick and his colleague is willing to take his place. Under the present regulations he is prevented from doing so by the hours and rest limitations. Provided that the 10-hour rule is not exceeded, are we justified in preventing a man who is willing to work from working, preventing that bus from going out and leaving the passengers, our constituents, waiting in the cold? We are not justified in doing that any longer.
There are a myriad examples of what this provision has meant but I make clear to the Opposition, particularly the hon. Member for Nuneaton (Mr. Leslie Huckfield), that, just before the right hon. Gentleman introduced his Order bringing these complexities into our law, an lion. Member from a Midlands constituency warned him of the connection between
… an imminent crisis in public transport, and the difficulties which will be brought about by the introduction of the Order.

That hon. Member went on:
I am glad that he has been able to grant up to a 16-hour spreadover on certain days "—[OFFICIAL REPORT, 25th February, 1970: Vol. 796, c. 1351].
That hon. Member was the Member for Nuneaton.

Mr. Leslie Huckfield: rose—

Mr. Griffiths: It does not lie well in the mouths of Labour Members to complain about the Order. When we took office, we found that they had left the bus industry staggering under the burden of higher fuel charges, eventually, but not immediately, rebated; staggering under sky-high interest rates, which we are now reducing; staggering under S.E.T., which we have cut in half; staggering under corporation tax, which we are reducing; staggering under inflationary wage increases, which we are bringing down.
On top of all this, there were strikes and a basic unsoundness in the way in which the right hon. Lady the Member for Blackburn (Mrs. Castle) chose to set up the National Bus Company without one penny working capital and with an obligation to take over an obsolescent fleet of London country buses without the money with which to do so. Coming on top of these impositions which the Labour Government laid upon this necessary industry, the previous drivers' hours regulations did no good whatsoever and a great deal of harm, and I hope that tonight the House will join the Government in removing them.

11.51 p.m.

Sir Harmar Nicholls: What has made the debate unreal is the fact that if the Labour Party had won the last election, in the light of the experience of the last 12 months, about now right hon. Gentlemen opposite would have; been bringing in regulations almost identical to these. It is a living certainty that the pressure from the industry, the drivers and the general public would have been such that that course would have been compelled. The regulations were not working, were seen not to be working, and the Labour Government knew that they were not working.
The Labour Government made a genuine mistake, and right hon. Gentlemen opposite should have faced their responsibility. The only argument which might have held water was completely disposed of by the figures given


by my hon. Friend—that the accident rate after the introduction of the regulations went up and not down. The argument that my hon. Friend's proposals will interfere with the safety of the industry therefore has no foundation.
The Opposition would have done themselves a good turn if they had recognised that they made a mistake instead of voting against these regulations, and they would have been upholding the best traditions of Parliament by doing so.

Mr. David Stoddart: I was interested in what the hon. Gentleman said about the accident rate. The logic of his argument was that the more hours drivers did—

It being one and a half hours after the commencement of Proceedings on the Motion, Mr. SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted Business).

The House divided: Ayes 144, Noes 95.

Division No. 363.]
AYES
[11.52 p.m.


Adley, Robert
Hall, Miss Joan (Keighley)
Normanton, Tom


Atkins, Humphrey
Hall, John (Wycombe)
Onslow, Cranley


Baker, Kenneth (St. Marylebone)
Hamilton, Michael (Salisbury)
Osborn, John


Beamish, Col. Sir Tufton
Hannam, John (Exeter)
Owen, Idris (Stockport, N.)


Benyon, W.
Harrison, Brian (Maldon)
Page, Graham (Crosby)


Berry, Hn. Anthony
Harrison, Col. Sir Harwood (Eye)
Parkinson, Cecil (Enfield, W.)


Biffen, John
Haselhurst, Alan
Pounder, Rafton


Biggs-Davison, John
Hawkins, Paul
Powell, Rt. Hn. J. Enoch


Boardman, Tom (Leicester, S.W.)
Heseltine, Michael
Price, David (Eastleigh)


Boscawen, Robert
Hicks, Robert
Proudfoot, Wilfred


Bray, Ronald
Higgins, Terence L.
Pym, Rt. Hn. Francis


Brocklebank-Fowler, Christopher
Hill, James (Southampton, Test)
Reed, Laurance (Bolton, E.)


Brown, Sir Edward (Bath)
Holland, Philip
Rees, Peter (Dover)


Buchanan-Smith, Alick (Angus, N&amp;M)
Hornsby-Smith, Rt. Hn. Dame Patricia
Rees-Davies, W. R.


Buck, Antony
Howell, David (Guildford)
Renton, Rt. Hn. Sir David


Carlisle, Mark
Hunt, John
Russell, Sir Ronald


Chapman, Sydney
Hutchison, Michael Clark
Shaw, Michael (Sc'b'gh &amp; Whitby)


Churchill, W. S.
Irvine, Bryant Godman (Rye)
Simeons, Charles


Clarke, Kenneth (Rushcliffe)
Jessel, Toby
Skeet, T. H. H.


Cockeram, Eric
Johnson Smith, G. (E. Grinstead)
Soref, Harold


Cooke, Robert
Kershaw, Anthony
Speed, Keith


Cormack, Patrick
Kilfedder, James
Spence, John


Critchley, Julian
King, Evelyn (Dorset, S.)
Sproat, Iain


Crouch, David
King, Tom (Bridgwater)
Stanbrook, Ivor


Curran, Charles
Kinsey, J. R.
Stewart-Smith, D. G. (Belper)


Deedes, Rt. Hn. W. F.
Knight, Mrs. Jill
Stodart, Anthony (Edinburgh, W.)


Dixon, Piers
Knox, David
Stuttaford, Dr. Tom


Drayson, G. B.
Legge-Bourke, Sir Harry
Taylor, Frank (Moss Side)


Edwards, Nicholas (Pembroke)
Le Marchant, Spencer
Tebbit, Norman


Elliot, Capt. Walter (Carshalton)
Lewis, Kenneth (Rutland)
Thomas, John Stradling (Monmouth)


Elliott, R. W. (N'c'tle-upon-Tyne,N.)
Luce, R. N.
Thompson, Sir Richard (Croydon, S.)


Eyre, Reginald
MacArthur, Ian
Trafford, Dr. Anthony


Fenner, Mrs. Peggy
Macmillan, Maurice (Farnham)
Trew, Peter


Fidler, Michael
McNair-Wilson, Michael
Tugendhat, Christopher


Fisher, Nigel (Surbiton)
McNair-Wilson, Patrick (NewForest)
van Straubenzee, W. R.


Fletcher-Cooke, Charles
Mather, Carol
Waddington, David


Fookes, Miss Janet
Maude, Angus
Walder, David (Clitheroe)


Fortescue, Tim
Maxwell-Hyslop, R. J.
Ward, Dame Irene


Fox, Marcus
Meyer, Sir Anthony
Warren, Kenneth


Fry, Peter
Mills, Peter (Torrington)
Weatherill, Bernard


Gilmour, Sir John (Fife, E.)
Moate, Roger
White, Roger, (Gravesend)


Godber, Rt. Hn. J. B.
Molyneaux, James
Wiggin, Jerry


Goodhart, Philip
Money, Ernie
Wolrige-Gordon, Patrick


Gorst, John
Monks, Mrs. Connie
Woodnutt, Mark


Gower, Raymond
Montgomery, Fergus
Wylie, Rt. Hn. N. R.


Grant, Anthony (Harrow, C.)
More, Jasper



Gray, Hamish
Mudd, David
TELLERS FOR THE AYES:


Green, Alan
Murton, Oscar
Mr. Victor Goodhew and


Griffiths, Eldon (Bury St. Edmunds)
Nicholls, Sir Harmar
Mr. Hugh Rossi.


Gurden, Harold






NOES


Armstrong, Ernest
Boardman, H. (Leigh)
Cohen, Stanley


Ashton, Joe
Booth, Albert
Concannon, J. D.


Atkinson, Norman
Bradley, Tom
Conlan, Bernard


Barnes, Michael
Buchanan, Richard(G'gow, Sp'burn)
Dalyell, Tam


Bennett, James (Glasgow, Bridgeton)
Carmichael, Neil
Davidson, Arthur


Bidwell, Sydney
Clark, David (Colne Valley)
Davies, Denzil (Llanelly)


Blenkinsop, Arthur
Cocks, Michael (Bristol, S.)
Davies, G. Elfed (Rhondda, E.)




Davies, Ifor (Gower)
Johnson, James (K'ston-on-Hull, W.)
Rodgers, William (Stockton-on-Tees)


Deakins, Eric
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Roper, John


Deil, Rt. Hn. Edmund
Jones, Gwynoro (Carmarthen)
Rose, Paul B.


Doig, Peter
Jones, T. Alec (Rhondda, W.)
Ross, Rt. Hn. William (Kilmarnock)


Douglas-Mann, Bruce
Kaufman, Gerald
Shore, Rt. Hn. Peter (Stepney)


Duffy, A. E. P.
Kinnock, Neil
Silkin, Rt. Hn. John (Deptford)


Ellis, Tom
Lamond, James
Silkin, Hn. S. C. (Dulwich)


English, Michael
Leadbitter, Ted
Sillars, James


Fisher, Mrs. Doris (B'ham, Ladywood)
Lewis, Ron (Carlisle)
Spearing, Nigel


Fletcher, Raymond (Ilkeston)
McBride, Neil
Stallard, A. W.


Fletcher, Ted (Darlington)
McGuire, Michael
Stewart, Donald (Western Isles)


Ford, Ben
Mackie, John
Stoddart, David (Swindon)


Garrett, W. E.
Meacher, Michael
Strang, Gavin


Gilbert, Dr. John
Mendelson, John
Taverne, Dick


Golding, John
Milne, Edward (Blyth)
Tinn, James


Grant, George (Morpeth)
Morgan, Elystan (Cardiganshire)
Torney, Tom


Hamilton, James (Bothwell)
Mulley, Rt. Hn. Frederick
Urwin, T. W.


Hardy, Peter
O'Halloran, Michael
Varley, Eric G.


Harrison, Walter (Wakefield)
Oswald, Thomas
Watkins, David


Hattersley, Roy
Owen, Dr. David (Plymouth, Sutton)
Weitzman, David


Huckfield, Leslie
Palmer, Arthur
Wells, William (Walsall, N.)


Hughes, Mark (Durham)
Pavitt, Laurie
White, James (Glasgow, Pollok)


Hughes, Robert (Aberdeen, N.)
Peart, Rt. Hn. Fred



Hughes, Roy (Newport)
Pentland, Norman
TELLERS FOR THE NOES:


Hunter, Adam
Reed, D. (Sedgefield)
Mr William Hamling and


Janner, Greville
Roberts, Albert (Normanton)
Mr. Joseph Harper.

Resolved,
That the Drivers' Hours (Passenger and Goods Vehicles) (Modifications) Order, 1971, a draft of which was laid before this House on 8th April, be approved.

Orders of the Day — AGRICULTURE (FERTILISERS)

12.2 a.m.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Anthony Stodart): I beg to move,
That the Fertilisers (United Kingdom) Scheme, 1971, a draft of which was laid before this House on 21st April, be approved.
The purchase of fertilisers for agricultural use has been subsidised by one means or another for the past 30 years, and it may be a measure of the success of successive schemes that, since they were first introduced, more than twice the amount of fertiliser is being used.
Like its predecessor, this Scheme provides for subsidy based on the nitrogen and phosphoric acid content of all inorganic fertilisers used in agriculture.
The House will recognise, it is not administratively practicable to subsidise organic fertilisers which vary enormously in nutrient content. During the latter half of the 1950s fairly massive increases in the level of subsidy were introduced in order to stimulate both the production and consumption of fertilisers. By 1959, when it was clear that the expansion in their use was gathering momentum, the annual cost of the subsidy had reached £30 million.
At the same time, prices were beginning to fall, and since 1960 it has been the practice to adjust the rates of subsidy from time to time so as to keep the annual cost at about £32 million.
The one year increase in fertiliser subsidy from 19th March, 1970, was introduced following the 1970 Annual Review as a means of injecting £9 million additional capital into the agricultural industry in a way which would benefit the great majority of farmers. The decision did not indicate a departure from the general policy of containing the cost of fertiliser subsidy in the United Kingdom at about £32 million. From 19th March, 1971, the subsidy rates reverted to the previous levels. With a few setbacks, the general upward trend in consumption has continued throughout the past decade and there is little doubt that most farmers are now fully aware of the importance of inorganic fertilisers.
I want to pay a tribute to the industry for the part which it has played in enabling me and many other farmers to produce more than twice the amount of food we used to, with half the number of hands.
The concentration of granulated fertilisers has played a very conspicuous part in the agricultural revolution. All the same, there is still room for further expansion in their use, particularly on grassland, and, although the subsidy is only one of the many factors affecting consumption, I hope the House will agree that the Scheme should be continued for a further year, with subsidy payments in


accordance with the Annual Review decision at the present rates, expressed, of course, in decimal terms, as proposed in the draft Order now presented for the approval of the House.

12.5 a.m.

Mr. Michael Barnes: We support what the Parliamentary Secretary has said about the contribution made by fertilisers to the agricultural revolution. I wish to ask only one question. A fertiliser manufacturer has just announced a sharp increase in the price of his products from 1st June this year amounting to 7½ per cent. This follows a 10 per cent. increase last January. Other manufacturers are likely to follow suit, if they have not already done so.
My right hon. Friend the Member for Anglesey (Mr. Cledwyn Hughes) negotiated an agreement with the fertiliser manufacturers in March, 1970, that they should hold down prices, for a period of 12 months, which may have been overtaken by events. One appreciates that certain increases are inevitable after a period of price restraint. Increases of this magnitude are very great indeed, particularly since from the farmers' point of view the extra subsidy which was paid last year is not payable during the current year. However, we must hear in mind that fertiliser prices are lower here than in many other countries. Does the hon. Gentleman feel that we have now reached a situation of reasonable price stability?

12.7 a.m.

Mr. Anthony Stodart: I am grateful for the hon. Gentleman's support. The March, 1970, agreement provided that unless special circumstances arose, manufacturers would do their best to hold down prices, and they did so. However, perhaps as a result of holding down the price for so long these increases have been forced on them by the inflationary causes we all know so well.
Despite this we still have the lowest fertiliser prices in Europe. A measure of advance warning has been given and it would still be possible for farmers to take in supplies at existing prices. The increased price which has been announced will not affect any of this year's crop. I hope that we will have reached a position of stability, but it will depend

upon the Government's success in combating high wage claims and trying to hold down inflation.

Question put and agreed to.

Resolved,
That the Fertilisers (United Kingdom) Scheme, 1971, a draft of which was laid before this House on 21st April, be approved.

Orders of the Day — LAW REFORM (JURISDICTION IN DELICT) (SCOTLAND) BILL

Order for Second Reading read.

Motion made, and Question put (pursuant to Standing Order No. 67 (Public Bills relating exclusively to Scotland)), That the Bill be committed to a Scottish Standing Committee—[Mr. Buchanan-Smith.]

Question agreed to.

Bill (deemed to have been read a Second time) committed to a Scottish Standing Committee.

Orders of the Day — WESTERN ISLES (UNEMPLOYMENT)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hawkins.]

12.10 a.m.

Mr. Donald Stewart: I am glad to have the opportunity to speak in the House about the problem of unemployment in the Western Isles. This is not a problem which has arisen only since the last election. As the Under-Secretary will appreciate, I say that not to absolve the Government of their responsibilities in any way but to point out that this problem is one of long duration. It has existed at least throughout my lifetime. It has been chronic and endemic for a long time.
In the last year, the average figure for unemployment was 25 per cent. There has been a slight improvement lately, but hon. Members will realise the serious situation that would exist in Britain if that level of unemployment were spread throughout every constituency in the country.
Even that shocking statistic does not reveal the true position. There are about


1,000 weavers in the Harris tweed industry who are not classed as employed persons. I shall approach the Government later with a view to rectifying the cruel travesty by which these weavers are classed as self-employed persons.
The full immensity of the problem is also masked by emigration. For lack of opportunity, the Hebridean must leave the island of his birth in search of work. Permanent "clearances" are operating in the Western Isles every year. Since the turn of the century every census has shown a fall in the population of each island. For some reason, in one of the islands there was a slight increase in 1951, but that was the only increase in population in any of the islands of the Western Isles at any census since 1901. The Highlands and Islands Development Board, in its 1969 report, said that another 400 had left in that year, and I believe that, when the figures are available, the coming census will show that the trend of a falling population continues.
The passion for education in the Western Isles also acts against us. From the islands we send to the universities more students per head of the population than any other part of Britain. This testimony to the intelligence of the people means that they must perforce work other than in the land of their birth. Once they obtain qualifications, they must, because of the lack of opportunity, place their skills other than in their homeland.
The building trade in Scotland is in a serious condition. Nearly a fifth of the unemployment is accounted for by the building trade. In the Western Isles we find no exception to this rule. In Stornoway the situation is extremely serious. It is made worse by the fact that when builders in the Isles are out of work, they leave the Isles to look for work and very seldom can be induced to return. It is difficult enough to encourage industry to come to the Western Isles, but local enterprise has also been throttled by lunatic restrictions.
For instance, I know of a new venture in Harris, an island which has been extremely hard hit. A new textile company was set up. Looms were purchased in Yorkshire. Because the company has been brought into existence locally, it must pay for the transportation of these

looms from the town in Yorkshire where they were purchased. Had it been a case of a company coming from Yorkshire, the freight charges would have been borne by the grants available. We are bedevilled by a transport system with abnormally high freight charges. It is essential that this barrier to development and a reasonable cost of living should be given high priority by the Scottish Office, with a view to removing or reducing substantially the burden on us.
The effect of the Highlands and Islands Development Board has been minimal in the Western Isles. I have told the present chairman that, in the first few years of the Board's existence, it appears to me to have had a mainly mainland orientation, and I am not alone in that view. Apart from the Outer Islands Fishery Scheme, which the Board took over after it was instituted by the previous Conservative Government, we see little sign of the Board's operation in the Western Isles.
Although we have not benefited under the Board to the extent that other parts of the Highlands have, every penny has been welcome. But the Board's expenditure must be kept in perspective. It has been pointed out recently that its total expenditure in the Highlands in the first five years was equal to the cost of eight miles of motorway. When the Scottish Trades Union Congress was demanding the setting up of such a hoard, it talked in terms of an expenditure of £250 million, spread over 10 years, it is true. That is the kind of financial backing that the Board should have had when it was set up.
I have said in the House before that no Government, whatever their colour, have made a real effort to grapple with the problem of unemployment in the Western Isles. But I am waiting for a sign of the will and desire to tackle the problem.
I make the following suggestions. The first one concerns a programme of public works. The hon. Gentleman may think that this is an easy answer, but public works are essential, and many of them are long overdue in the Western Isles. We suffer many disabilities from the lack of works which should have been carried out not years but generations ago in some cases. I suggest, for instance, that


the road from Rodel to Stornoway, instead of being done in instalments, should be done at once as one unit. It is necessary to transport goods from the ferry landing at Rodel to Stornoway. There is also an urgent need for a new main road in North and South Uist.
To assist the building trade, much urgently needed building should go ahead now. I have in mind schools, for example.
Then there are water schemes. I understand from the county councils of Inverness-shire and Ross-shire that there are schemes in the offing. I hope that the Scottish Office will look at them with favour.
More finance should be given to the H.I.D.B., and its powers should be increased. If it proves impossible to get the development to come north on the scale that we require, the solution is to allow the Board to initiate schemes of its own.
Another possibility is the return of the Stranraes-Larne ferry to the Scottish Transport Group. This ferry, operating on the west coast, was kept out of the Group. It earned £700,000 in 1968. That profit should go into the pool for the benefit of the whole west coast. Instead of giving this profitable section of west coast sea transport away to British Railways and leaving the other islands under the nationalised system, many of them running at a loss, the whole should be one. This might result in a more reasonable level of freight charges.
Then the Government might consider the abolition or reduction of income tax for a stated period. This may seem a romantic notion. This device has been tried elsewhere with good effect. The Government should set their mind to looking at the possibilities. In any case, we pay the same tax as the rest of the country for many services which we do not enjoy.
I want to record my support for the five-point plan put forward recently by Sir John Toothill. The hon. Gentleman will be aware of the details. Sir John said, "Why not, for a change, try stimulation instead of restriction?" I echo this for the Western Isles. Most areas in Scotland are needful, some more than others, but my constituency, on the

facts, is the neediest of all. I call on the Government to do their duty.

12.21 a.m.

Mr. Hamish Gray: I am grateful for the opportunity of contributing to the debate. I should like to associate myself with what was said by the hon. Member for the Western Isles (Mr. Donald Stewart). He has made a good case for his constituency and I hope that the Under-Secretary will take note of the points which he has raised.
I should like to mention my constituency, Ross and Cromarty, neighbouring the Western Isles. While we do not have quite the same problems, our unemployment rate has risen considerably over the past months, and this worries all of us.
I suggest that one way that the position could be assisted would be the speeding up of planning procedures. Recently the Scottish Office announced that the new extension to the A.9 north of Inverness would include the bridging of the two Firths. Under present methods, it seems that this will take a considerable time. My constituency needs some immediate steps to be taken to alleviate unemployment. Anything which can be done by the Scottish Office to improve and speed the planning procedures would be welcomed. Under present methods, it is unlikely that any start will be made before 1973. I should like to see this situation improved handsomely. I do not anticipate any objection in my area to the proposed new line of the A.9 north of Inverness. Ross and Cromarty should stand as an example to the rest of the country in the speeding up of planning procedures.
I should like to think that we would produce something in place of the investment grant system, which was not a success in the Highlands. We had only one major project, and the capital amount spent on it was out of all proportion to the number of jobs produced. I hope that we shall come forward with an alternative to take the place of the investment grant system.
I believe that every encouragement must be given to the Highlands and Islands Development Board to produce new functions and ways of attracting industry to the Highlands.

12.24 a.m.

The Under-Secretary of State for Home Affairs and Agriculture, Scottish Office (Mr. Alick Buchanan-Smith): I congratulate the hon. Member for the Western Isles (Mr. Donald Stewart) on obtaining this Adjournment debate. I confess that from his position I always envied those who got such an opportunity to raise particular points relating to their constituencies. With the pressure that there is on Adjournment debates, those who get them are very fortunate. I congratulate the hon. Gentleman on the way that he has used his opportunity and thank him for the moderate and constructive way in which he put forward his points.
I am grateful to my hon. Friend the Member for Ross and Cromarty (Mr. Gray) for intervening. I have certainly taken note of what he said. But it is to what was said by the hon. Member for the Western Isles that I want to direct my remarks.
I share the hon. Gentleman's concern about unemployment in the Western Isles. He said, quite rightly, that this is not a new problem. There was a marginal improvement in 1970, but no one can be satisfied with that when the absolute level is so high.
The statistics of unemployment in the Western Isles, compared with those of areas further south, show that comparisons are not easy. The official rate does not reflect the true situation, because it includes self-employed weavers who do not qualify for unemployment benefits but must register as a condition of receiving supplementary benefits. So they appear in the unemployment figure but not the total figure of Class I employees in the area. The percentage rate is based on the numbers of registered unemployed against the numbers of Class I employees, so this could lead to the situation sometimes being over-stated. I do not say this to belittle the situation, and it is no comfort to those out of work, but it is not always borne in mind in statistical comparisons.
The Government are not complacent about this any more than they are about the migration from the area. Although there has been consistently high unemployment in Lewis and Harris, the migration rate has been lower than in other

parts of 'the Highlands and Islands. What is disturbing is the high rate of loss of younger people, which of course, unfortunately unbalances the age structure.
The hon. Member's main question related to the public works programme and the way in which it could help unemployment. This background of unemployment and migration naturally leads to suggestions of a crash programme, which the hon. Member has campaigned hard for. But the Under-Secretary of State for Development, in a letter, told the hon. Member that the Government's view, on this and other problems, is that our first economic priority is to get the whole country on as firm a footing as possible, as quickly as possible. Our conclusions on these major questions of investment are in our two White Papers on investment incentives under the new public spending policies.
We must consider the problem of the Western Isles against this general background. The difficulties there must be tackled on a number of fronts. The emphasis should be on the development of activities which fall naturally into the economic life of the area. This does not mean that public works are being neglected. I have taken note of the hon. Member's suggestions of schemes which he would like pressed forward. Already there is a fairly ambitious scheme of roads, new education buildings and water schemes. For instance, the Tarbert—Rodel road in Harris is under way in the final stage at a cost of £260,000. There is also the construction of new primary schools at Crowlista and Gravir, costing £76,000 and £78,000, respectively. As the hon. Member knows, it is hoped to make a start next year on the Nicholson Institute, Stornoway, at a cost of £185,000.
The hon. Member also mentioned water schemes, on which he put a Question to my hon. Friend on 17th March. The House should know that during the last nine months we have approved seven schemes costing £250.000. It is also worth remembering that these schemes attract the maximum rate of grant for schemes of this type of 75 per cent. It is also a point of interest that during the last eight years, no scheme which has been put forward has been rejected by the Government. As we all know.


the initiative for applying for and starting water schemes must rest with the water boards in the areas concerned.
When one adds up all these different schemes of public works, in roads, education and water, one finds that sums of upwards of £½ million are being spent in the Western Isles. Obviously, one would like to see more being spent, and the hon. Member is right to draw attention to this. At the same time, I do not think that he would chide me for describing for the sake of the record exactly what has been done.
What really concerns us is the question of new industries. Obviously, it is of paramount importance to get new jobs which can help to meet the unemployment situation. Equally, as, I am sure, the hon. Member will admit, this is not a task which the Government themselves can carry out directly. The key decisions are what to make and how to sell it, and these are essentially matters for the private promoter. The job of the Government in this, as in other areas, is to provide the general climate and the machinery by which promoters are encouraged to establish new industries.
The attraction of new industries to areas is a matter for any development agency which exists in those areas and for the local authorities. For the Highlands and Islands, the main development agency is the Highlands and Islands Development Board, which has considerable funds and powers. I should like to put firmly on record that we are right behind the Board in the work that it is doing and we will give it every support we can to solve the difficult problems which have been described tonight. As the lion. Member knows, the powers for development of the Highlands and Islands Development Board, both in terms of finance and direct powers, are greater than those in any other development area. The rate of grant which it can give is also extremely high.
The hon. Member expressed the view that the Western Isles had been neglected to some extent by the Highlands and Islands Development Board and that it was more mainland orientated. I should like to give him one important statistic. In the Western Isles, assistance which has been approved to date by the Board amounts to £41 per head of population.

This compares with a figure for the mainland of Ross and Cromarty of £26 per head of population, and for the whole of the area of the Highlands and Islands Development Board of £32 per head. I agree that a per head sum like this does not tell the whole story, but it indicates that the Highlands and Islands Development Board has certainly not ignored everything concerning the Western Isles.
While we obviously want to see the Board encouraging new industry to the Islands what I hope we shall see also, as we have already in the Harris tweed industry and fishing, is a considerable amount of local enterprise. I think it most important. There is a great deal of scope for local enterprise. The hon. Gentleman mentioned some of the problems and penalties of remoteness and distance from the mainland, but that remoteness and distance, it seems to me, can itself create opportunities for local enterprise. One thing which has never ceased to amaze me about the Western Isles is that all the bread—or a great deal of it, anyway—is brought in from Glasgow. I have often reflected that in this one, comparatively minor, field there is scope for individual local enterprise in the form of a bakery. That is just an idea I throw out. There is scope for local enterprise, and I am sure that the hon. Gentleman will agree with me that one of the strongest form of enterprise is that which comes from those who have their roots in the locality.
What worries us at the present time is the situation in relation to the Harris tweed industry. The Highland Board and the Government are very concerned over the duration of the current recession in the industry. Having discussed it with those concerned in the industry, the board has decided to make a study, as the hon. Gentleman knows, of the future of Harris tweed. This study will seek all means of improving, expanding and diversifying the industry. I personally hope that it will be very helpful.
In talking about industry one point I should like to make is about, of course, the fishing industry, in which I have a particular interest. As the House knows, my right hon. Friend the Secretary of State has authorised the Highland Board to continue for a further year, and on


roughly the same lines, the comprehensive fisheries development scheme. A further expansion of the scheme will be the subject of review within the year. What it means is that in the current year the Board can be expected, in respect of the Highlands and Islands area as a whole, to give loans to new entrants for the purchase of about seven new inshore fishing boats, supplementing the White Fish Authority's and Herring Industry Board's grants, and also loans to experienced fishermen, enabling them to purchase about 30 inshore boats, and also loans which will cover about the same number of shell fish and sea angling boats. Some idea of the impact of the scheme can be gathered from the fact that while in 1966 there were 26 boats of over 40 ft. registered in the Western Isles the number in 1970 was 52.
There have been benefits from the increased catches, which have been very marked, and it is interesting that landings in Stornoway increased in value from £113,000 in 1966 to £239,000 in 1969.
I am very hopeful, too, of the fish processing plant, which has hitherto been run by the Highland Board under the name Gaelfish but is now continuing under the ownership of Rolf Olsen. I wish it every success. It is a basis of industry in the area. Then, as the hon. Gentleman knows, there is the proposed hotel scheme on Barra, and there are a number of minor schemes as well.
The subject of the debate has been unemployment. There is no doubt that for those who are unemployed the needs at present and the immediate future are

very real indeed—in the levels of activity in the Harris tweed industry and in the construction industry. This particularly relates to what the hon. Gentleman said about public works and factories. What we are looking forward to is a much more hopeful situation in providing employment in construction, and one of the hopeful factors in providing additional employment is afforded by the rocket range at Benbecula, and others by the tourist and fishing industries. Other hopeful factors are the determination of the Highland Board, and the growing interest of local authorities in the problem, as evidenced, for example, by the appointment by Ross and Cromarty County Council of a development officer, to study economic development.
In thanking the hon. Gentleman again for raising this debate I assure him that we shall give the Board and the county council all the support we can in carrying forward schemes which are in hand and new schemes in future in helping to resolve the very real problems which his constituents have to face.

Mr. Tam Dallyell: rose—

The Question having been proposed after Ten o'clock on Wednesday evening, and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty minutes to One o'clock.

Orders of the Day — Second Reading Committee

Wednesday, 12th May, 1971


[SIR RONALD RUSSELL in the Chair]


The Committee consisted of the following Members:


Sir Ronald Russell (in the Chair)


Bagier, Mr. Gordon A. T. (Sunderland, South)
Monks, Mrs. Connie (Chorley)



Morgan, Mr. Elystan (Cardigan)


Brown, Mr. Hugh D. (Glasgow, Provan)
Morrison, Mr. Charles (Devizes)


Carlisle, Mr. Mark (Under-Secretary of State for the Home Department)
Rhys Williams, Sir Brandon (Kensington, South)


Fitch, Mr. Alan (Wigan)
Rossi, Mr. Hugh (Hornsey)


Haselhurst, Mr. Alan (Middleton and Prestwich)
Soref, Mr. Harold (Ormskirk)



Tapsell, Mr. Peter (Horncastle)


Jones, Mr. Dan (Burnley)
Taylor, Mr. Frank (Manchester, Moss Side)


Latham, Mr. Arthur (Paddington, North)



Leonard, Mr. Dick (Romford)
Taylor, Mr. Robert (Croydon, North-West)


Lewis, Mr. Arthur (West Ham, North)



Lipton, Mr. Marcus (Brixton)
Wilkinson, Mr. John (Bradford, West)



Miss J. Beston, Committee Clerk.

Orders of the Day — POOL COMPETITIONS BILL

10.30 a.m.

The Under-Secretary of State for the Home Department (Mr. Mark Carlisle): I beg to move,
That if the proceedings on the Pool Competitions Bill are not completed at this day's Sitting the Committee do meet on Wednesday next at half-past Ten o'clock.
In moving this Motion I hope very much that we shall be able to finish the Committee's proceedings on the Bill at this one Sitting. I felt that it was a necessary precaution, nevertheless, to move this motion.

Question put and agreed to.

Mr. Carlisle: I beg to move.
That the Chairman do now report to the House that the Committee recommend that the Pool Competitions Bill ought to be read a Second time.
I am afraid that anyone looking at the Bill will come to the immediate conclusion that its provisions are somewhat

complicated and its language somewhat technical. Inevitably, my speech explaining it to the Committee is likely to be equally complicated.

Although the Bill's provisions may be complicated its purpose is simple. It is to safeguard the position of certain charities and sports which in the recent past have derived a substantial part of their income from what have become known as charity pools. It is a Bill which meets the wishes of hon. Members on both sides who have made substantial representations to the Home Office that legislation in this form should be enacted.

No doubt the Committee will be aware that for some years a considerable number of competitions, inevitably based on the outcome of football matches and in many ways akin to football pools, have been operating, from which charities and sports have derived considerable financial benefit. These competitions purported to


operate as lawful pool betting, but the decision of the House of Lords in November of last year in the case of Singette Limited and Others v. Martin held that these competitions did not amount to lawful pool betting and were in fact unlawful lotteries.

The purpose of the Bill is to restore, to a limited extent, and for a limited period set out in the Bill as five years, the position which was believed by the charities and sporting bodies to obtain before the decision of the House of Lords. It does no more than make the necessary changes to enable competitions to continue by treating them for a limited period as if they were lawful pool betting.

I should emphasise at the outset that this is the limit of the extent of the Bill. It is important to realise that these operations will continue to be subject to the full control of ordinary pool betting law contained in the Betting, Gaming and Lotteries Act, 1963, in addition to special controls contained in this Bill.

I have tried to explain the purpose of the Bill. I have referred to the fact that its provisions are somewhat complicated. I have said that its intention is merely to restore the position as it was believed to be before the recent House of Lords decision. I cannot help commenting on the fact that in a leading article on 23rd February of this year The Times said:
Possibly the best way of meeting this need would be a Bill of one Clause in effect to reverse the decision of the House of Lords.
Regrettably, although we agree with the proposal and the purpose, we have not found that that is the simplest way. That is why we have a Bill of eight pages and 10 Clauses, some of them fairly long and complicated.

To explain how the situation has arisen perhaps I should say a few words about the existing law on lotteries and pool betting.

The two operations are similar in many respects. Both are based on the principle that a number of entrants make a certain payment comprising either entrance money or stakes. The payments are then put into one pool from which deductions are made to cover administrative expenses. What is left in the pool is then divided among the winners. That is common to both lotteries and pool betting.

The essential difference is that, in the case of a lottery, the winners are determined by lot or chance, whereas in the case of pool betting, entries must comprise a forecast involving at least the possibility of the exercise of a certain element of skill, the winners being determined by the success of their forecasts.

By our law, apart from certain exceptions allowing small lotteries to be conducted provided that they comply with certain conditions, lotteries are unlawful.

Pool betting, where a forecast is involved, is lawful provided that it complies with the requirements of the pool betting law. The requirements are aimed at preventing fraud to which the character of pool betting is very susceptible. Whereas in the case of an ordinary bet between two people the amount of the stake is known, the odds are known, and the winnings can be calculated and checked, in the case of pool betting the amount of winnings available for distribution depends on the size of the pool. The size of the pool depends on the number of entrants, and, consequently, when the number is very large, the prize may be considerable and the total amount of money handled substantial. Without strict control, it would be easy to organise a pool and deduct from it a substantial proportion before dividing the rest as the winnings, and without its being readily checked by the people involved.

That is why we have the pool betting laws, aimed to prevent fraud. The object is to ensure that pool betting may only be conducted by promoters who are registered with a local authority for that purpose and who have satisfied that local authority that they are fit and proper persons, that all entry moneys are put into the pool, that the pools are administered so as not to favour any particular entry, and that the whole is subject to the scrutiny of an independent accountant appointed by the local authority. The law also requires full publication of the promoters' profits and expenses, which is normally effected by the publication of a statement expressing them as a percentage of the pool. Those are the requirements of the pool betting law aimed at ensuring the fair running of pools.

I should emphasise that, other than that, the law imposes no limit on the profits which a promoter may take from the conduct of a pool, provided that they are disclosed. It is up to the entrants, in the light of the information available to them, to decide whether they are getting fair value for money for taking part in any type of pool betting.

The schemes which the House of Lords found to be unlawful lotteries had many similarities with legitimate pool betting, but there were important differences. The principal difference was that the overwhelming majority of those who took part in this type of charity pool made no forecast. The necessary ingredient for lawful pool betting, namely, that the outcome would depend on a forecast involving the exercise of a certain degree of skill, was missing. As a result, they became unlawful lotteries.

Most of the schemes were operated by issuing each person taking part with a set of numbers, normally at the beginning of the football season. Different numbers were applied to different football teams. They were changed each week, so that an entrant's set of numbers represented a different combination of teams each week. Prizes were distributed according to various criteria, such as the team with the highest or lowest aggregate score; or according to various other factors. Although it was open to any entrant to ask for different numbers in any week so as deliberately to choose a combination of teams for that week, so that one could say that he was making a forecast, this option, in practice, was so rarely exercised that the House of Lords held that the whole amounted to a lottery instead.

One consequence of this system of giving people numbers at the beginning of the season was a substantial reduction in administrative costs, in that it was unnecessary then to check weekly entries. All that was needed was to look up the names of the possessors of the various sets of numbers to see who had won. It is that difference which rendered them lotteries and unlawful.

Leaving aside the question of their legality as a lottery, whether they could ever have constituted lawful pool betting is not clear. The House of Lords de-

liberately left the point undecided. The problem was whether the possession by an entrant of four numbers, and the payment of a weekly entrance fee, could be properly described as making a bet. However, that is one technicality which it will not be necessary to pursue further, since the Bill is drafted so as to deem entries made in this way to be bets for the purpose of the pool betting law.

The schemes had other features which distinguished them from ordinary pool betting, the most important being that they operated to provide financial contributions to charity and sport. It seems clear that the attraction for many of those taking part was the feeling that, in addition to the possibility of making a substantial personal win, they were also making a regular weekly contribution to a good cause. Since the success of the schemes depends on the number of entrants they can attract, the financial benefits accruing to charity and sport is undoubtedly a strong selling point.

Another feature distinguishing the schemes from ordinary pool betting is the greater reliance placed by them on the collection of weekly entry moneys by local collectors organised under a system of regional supervisors. This is a system which is used by ordinary pool betting promoters, but it is used more by the types of schemes dealt with by the Bill. The advantage of the system is that it enables new entrants to be introduced by the effective method of direct contact, coupled with the fact, I assume, that it is made clear to the entrant that part of what he is giving will go to charity, to induce him to take part in the scheme. It also enables the interest of existing members to be maintained, and provides an easy machinery to distribute cheaply the necessary literature to make the scheme work.

It has, however, the disadvantage that these collectors, who are paid on commission, add considerably to the administrative costs, although this is weighed against the savings, because the weekly checking of the pools is not required.

Another important feature is the combination of these schemes with other forms of distribution of prizes which do not purport to be pool betting and accordingly do not come within any part of the existing system of control. These collateral benefits are an important part


of these schemes. Some proved to be lotteries and unlawful on that account. In other cases distributions are made in such a way as to avoid their being unlawful lotteries. Some of these schemes are also combined with modest weekly insurance schemes which act as a further inducement to the entrant to maintain his regular weekly payments into the schemes.

These collateral schemes are of importance in considering the provisions which have to be made in the Bill. It has been the practice for some promoters to run a whole scheme by a series of separate companies, one company running the pool competition and others being responsible for the related benefits. In some cases the contribution to charity for sport has in fact been made out of the turnover of the companies concerned with the related benefits and not out of the turnover of the company running the pool as such. Therefore, we cannot deal with the pool competition in isolation—this is one reason for the complexity of the provisions—and it is necessary to take into account the whole system by which these schemes have been operated.

From the information made available it would seem that the financial pattern of these schemes is subject to a great deal of variation, and the benefits obtained by certain charity and sporting clubs have been substantial. For example, in one scheme 25 per cent. of the entry money goes into the pool and 75 per cent. goes into the related benefits scheme. Other competitions have been differently organised, with a much greater proportion of the entry money going into the competition proper. Equally, the proportion or amount of benefit going to charity and sport has varied substantially from scheme to scheme. In some schemes it has averaged 10 per cent. of the total turnover; in others it has reached a higher figure.

We should realise the kind of figures with which we are dealing. The annual turnover of one of the largest schemes is about £15 million. A 10 per cent. contribution of that sum represents about £11 million going to charity out of the running of that scheme alone.

I should stress that we have received the fullest assistance from the charities and from the promoters of the schemes

in drafting the provisions of the Bill. Basically, we believe that there are about six major charities which gain fundamentally from schemes of this nature.

The size of the benefit to charity and sport, so strongly emphasised by various hon. Members on both sides of the House who came to see me at the Home Office, and in letters which I have received, led the Government to decide that they could not afford to allow them suddenly to lose incomes of this size. It would clearly be impracticable in the short term for the interests concerned to find comparable sources of money to replace what they would lose by the ending of these pools. Equally, it would have been impossible to have introduced comprehensive permanent legislation to regulate the situation in time to save the income on which these charities and some sporting clubs so largely depend.

We therefore decided that the right course was to introduce temporary provisions, in the nature of indemnifying legislation, to enable those charitable and sporting interests concerned, which had come to depend on this form of income, to continue to enjoy it while the whole of the law in this sphere is reviewed. It is that end which is achieved by the Bill.

I mentioned the need to review the whole of the law regarding lotteries and betting. Pool betting is widely accepted. It is not only a question of these particular types of pools. The Committee will be aware that proposals have from time to time been made for a national lottery, for municipal lotteries, for lotteries to support the Arts, and for lotteries to support sport and charitable causes. There is tremendous doubt about the variations between the law on lotteries and the law on pool betting, and it is clear that we cannot make piecemeal changes in this sphere. Therefore, the Government have set up an inquiry into the whole matter.

At the same time I should point out that to legalise large scale lotteries generally could bring about a situation in which a number of good causes would be so much in competition that the final benefit to each of them might be small in relation to the resources deployed.

In the meantime, while that review is going on, the Bill will enable the charities and sporting interests affected to continue


to derive income from this source. I hope that the organisations concerned will take a warning—namely, that the Bill is allowing them a breathing space, and that, during that breathing space, they should seek to diversify their sources of income. The Government, pending the review, would not wish it to be assumed that, because the Bill has been introduced, more permanent legislation will be prepared which will necessarily guarantee the continuance of these competitions in their present forms—for the reason, as I mentioned earlier, that we have to consider what in the end the benefit would be if all charities were able to take part in large scale lotteries of this kind.

Mr. Dan Jones: Will the Minister tell us when that review is likely to appear?

Mr. Carlisle: I cannot tell the Committee when the review is likely to be completed. It is starting shortly. It is to be an internal review by Home Office officials, who will welcome any written representations and suggestions about the highly complicated mass of law involving lotteries and pool betting as such.
It has to be remembered that, in addition to the benefits to charity and sport. these promotions have comprised a simple commercial operation which has operated, clearly in breach of the law, over a number of years. The Bill enables these activities, which were operating in breach of the law, to continue for another five years, but it will not allow any further new entrants to come into this area of operation. The only justification for favouring these enterprises in this way is the catastrophic result which the ending of their incomes would have on the charities and sporting interests which benefit as a result of what, we accept, they believed were lawful competitions.
I should now like to deal briefly with the individual Clauses. The Bill, as its Title implies, deals with schemes which are described as pool competitions. The phrase, "competition for prizes", with which we are concerned, is defined in Clause 7. It has been necessary to introduce this new term to describe the schemes with which we are dealing, which are not pool betting but are in most respects to be treated under the Bill as if they were pool betting. The definition

of "competition for prizes" is important and is to be found in Clause 7(2). That makes it clear that the allocation of prizes must depend on the outcome of a sporting event, that there is a right for everyone taking part to forecast the outcome, even though it is not exercised, and that prizes can be won whether or not a forecast is made.
The Bill operates to legalise the competitions in question by providing a procedure, first, for identifying those existing schemes which are intended to be covered by the Bill, and, secondly, by providing a scheme by which they can be licensed. When they are licensed they will be deemed to be lawful pool betting, and can continue to operate in the way in which they have operated in the past, subject to certain additional new controls.
The pivot of the new procedure is the Gaming Board. We are extremely grateful to the Chairman and members of the board for taking on this additional task. It has been necessary to introduce a central authority of this kind, which will have considerable discretion in operating the scheme, because of the wide variations which exist from scheme to scheme and the difficulty of knowing, without further full information about the various schemes, what general or particular provision ought to be made. Accordingly, the Gaming Board is given wide powers, first, to issue certificates identifying the schemes which will benefit under the Bill, and, secondly, to licence those schemes to continue, subject to controls which it may impose upon them.
The procedure for issuing certificates, which is the first step, is contained in Clause 1. This sets out the criteria which must be satisfied before a pool competition can obtain a certificate. The essential criteria are, first, that it must have been conducted by a registered pool promoter registered under the local authority, and. secondly, that it must have held at least 26 competitions during the year preceding the House of Lords decision. The purpose of those criteria is to make sure that the Bill benefits only those pool competitions which existed at the time of the decision and cannot be taken advantage of by new entrants coming into this sphere.
We are not sure whether we are right in laying down the condition of at least 26 competitions over a one-year period.


It may be necessary to reduce the qualifying period prior to the date of the House of Lords decision. If we did, we should have to reduce the number of individual competitions which took place during that qualifying period. That is a matter which the Home Office is discussing with the various interests which have made representations about it.
Also, the competition must have benefited some charitable, sporting or other organisation not established for private gain. To a certain extent, those are saving words, because we believe that the vast majority of the schemes have been for the aid of charity or sporting organisations. These criteria are set out in the Clause. When an applicant has satisfied the board on those criteria the board must issue a certificate to him.
The licensing provisions are contained in Clauses 2 and 3. In addition to issuing the licence the Board is given wide powers to impose conditions under which the schemes can operate. The primary object which the board must satisfy in exercising its powers is set out in Clause 2(2),
to secure that each of the societies named or identified in a certificate under this Act will derive financial benefit from competitions for prizes authorised by a licence under this Act.
In addition, the board is required to impose conditions which will ensure that full information about the whole operation of the scheme is made available to those who take part. The board has powers to impose what other conditions it thinks fit.
There are two particular aspects of these powers which I should mention. The first is that under the present pool betting law a pool promoter is required to make a statement about his commission and expenses. This requirement is not apt to the much more complicated operation of the schemes dealt with in the Bill. Accordingly, that provision in the existing law will not apply to these competitions. Instead, this aspect will be dealt with by special conditions tailored to meet the individual scheme and imposed by the board under the powers which I have already mentioned.
The second is that there is some reason to believe that the system of door-to-door collection on which these schemes have

been based has contravened the provisions of the house-to-house collections legislation which requires, among other things, that every collector of money for charitable purposes has to be authorised and carry a badge, and that the accounts of the promoter be scrutinised.

Mr. Dan Jones: What is the issuing authority for those badges?

Mr. Carlisle: I believe that the local authorities are, for the house-to-house collections; I am not sure of the position of the badges.
That house-to-house collections legislation is inappropriate to this Bill, not from the point of view of the wearing of badges but from the point of view of the scrutinising of accounts. The kind of scrutiny which that legislation imposes will be provided for these competitions by the Gaming Board. So provision has been made for collectors in these competitions to be exempted from the house-to-house legislation. That is in Clause 3(5).
The Gaming Board will be able to require any information it needs from the promoters; that is under Clause 4. This information will supplement the information already available to the individual accountant appointed by the local authorities, whose role will, of course, continue unchanged in relation to these competitions in so far as the Bill treats them as pool betting. So they will still be subject to that independent scrutiny.
In obtaining this information, the board will see that the operation is properly run and the maximum income made available to the benefiting society. The Committee will realise that this gives it wide discretion in the conditions which it imposes. We believe that, with the wide variety of schemes, this is the only way to see that they are properly run, instead of attempting to lay down a rigid legislative procedure.
Licences under the Bill will run for a year. The board is given wide powers to extend or revoke a licence. The intention in the first place is that the board should issue licences with as little delay as possible, so as to enable the schemes to continue. Because of this, facts may later come to light which, had they been known in time, would have led the board to a different conclusion either about the issue of a licence or about the


character of the conditions to be included. These powers will enable the board to keep licences continually under review.
The financing of the new procedure will be covered by fees payable by applicants for certificates and licences. The amount of these fees will be prescribed by the Secretary of State under Clause 5, and any order will be subject to negative resolution procedure. The scale of these operations varies substantially, and the appropriate fee will not be apparent till the board has begun its work. This is why figures have not been included.
To prevent difficulty between the date of application for a certificate and a licence and the date of the grant, Clause 6 provides that no proceedings in respect of certain offences shall be instituted in England and Wales except by or with the consent of the Director of Public Prosecutions. Clause 6 relates to the time between the application and the grant.
The effect of the grant of a licence will be to treat these competitions as lawful pool betting. This will remove them from the lottery law and ensure that they are subject to the ordinary provisions of pool betting law. The special procedures in the Bill will, however, ensure that the proper control is exercised in respect of special features of these schemes.
I said that this was a complicated Bill, dealing with a highly technical part of the law, and inevitably my speech has been complicated and somewhat longer than one might wish in a Second Reading Committee, but I hope I have managed to explain the purpose of the Bill and the way in which that purpose is achieved, and to explain, if only briefly, its provisions. I am satisfied that the Bill will make it possible for those operations which have been in existence and of substantial benefit to certain charities and sporting clubs to continue for the time being, while a more permanent solution to the whole problem of lotteries and pool betting is found. I therefore commend the Bill to the Committee.

11.7 a.m.

Mr. Elystan Morgan: The Under-Secretary of State has done the Committee the courtesy of dealing with this matter with all the care and lucidity

which the House regards as characteristic of him. This Bill does not divide us on party lines, and I am sure that, in general terms, we can support its purpose. It may be just as well that it is not politically controversial. If it were, I fancy that it would be a Valhalla for many months for lawyers and obstructionists—always supposing that those represent two different categories.
When, on 25th November last year, the House of Lords decided, in the case of Singette and Martin, that football pool competitions on a numbers basis between members of a club were illegal, the bottom fell out of an industry which had grown popular over recent years and part only of whose profits had been paid to a number of charities. Some of these charities were almost absolutely reliant upon that source of income. A fair warning of the ultimate result had been given in October, 1969, when the Cardiff Stipendiary Magistrate found in the Singette case that such pools were illegal, and later, in April, 1970, when this case came, by way of case stated, before the Divisional Court. As we have heard, the coup de grace was administered to any lingering hopes when Lord Pearson, delivering the judgment of the House of Lords, said that, where only 1 per cent. of the participants actually made any attempt at exercising skill in forecasting the result of a sporting event,
… for the 99 per cent. in any week who make no forecast but win prizes if their numbers happen to be lucky numbers, for that week the competition has the character of a lottery.
Many deserving charities which have given noble service to the community found that they were deprived of many millions of pounds per annum. About £4 million or £5 million was involved a year or two ago, and it may well have increased since. One society in particular, the Spastics Society, which received between £1½ million and £2 million per annum, according to Press reports, probably would not have been able to operate but for this source of income.
The oases of Singette Limited and Others v. Martin not only pointed to a major flaw in the 1963 Act but also to a certain—rather, an uncertain—ambivalence towards lotteries in our society. Faced with this situation, some people


advocated that lotteries law should remain immutable on the basis of the 1963 Act, but others took the opposite, extreme view and advocated almost the total abolition of lotteries legislation.
When I was a Junior Minister in the Home Office, eighteen months ago, consideration was given to this problem, although at that stage it was more a case of finding fatal flaws in propositions put forward by hon. Members than being able to hammer out any concrete plan. I warmly congratulate the Under-Secretary on having achieved a practical solution. I remember thinking at that time that there were two main directions from which to approach the problem.
The first was to redefine in wider terms the making of a forecast and the result of a sporting event; but the impression which I had then, and which I certainly still have, is that this would be much like trying to insert a large rock into a pyramid of loose stones, and that, if this were done, there would in practice be very little left of the generality of prohibition against lotteries in Section 41 of the 1963 Act.
The alternative seemed to be to leave lottery legislation substantially as it was, but to exempt certain charities from its operation. Of course, it would have been invidious to have included in a Bill a schedule of charities. That would have been far too inflexible. I believe that tackling the problem from this general direction is more desirable than from the other direction. We certainly support the Government's general method. It would be impossible for them to decide what charities should be the objects of this bounty.
It may be rather hard to confine the benefits of the Bill to charities which received these funds during the 12 months ending 24th November, 1970. After all, these competitions have been running for many years, and charities which were particularly interested in this form of revenue, it can be argued, have had their chance. On the other hand, it could be very unjust on a charity which one might regard as an ad hoc charity, coming into existence on account of a tragedy or disaster, the character or magnitude of which might not be envisaged at this stage. If that happened, perhaps the Government

would consider amending legislation. But there is a fault here, on account of the rigidity of the system, although I am willing to admit that all other alternatives would have been less wholesome than this one.
I am glad that the power of decision has been vested in the Gaming Board, and on behalf of my hon. Friends I wholeheartedly endorse the thanks given by the Under-Secretary to the board for its willingness to take on this task. I believe that it is well suited to discharge this duty, and the manner in which it has carried out its duties over the last three years has built up a stock of public confidence in the way the board operates.
At the same time, although the board is well qualified to deal with the betting lottery side of the problem, I do not think the board itself would lay claim to any particular knowledge of the operation of charities. We can discuss this further at the Committee stage of consideration of the Bill, but perhaps the Under-Secretary will consider incorporating in the Bill some provision which would allow the Gaming Board to consult the Charity Commissioners in certain necessary cases. There may be problems to be considered which are firmly in the sphere of charity matters.
There are a number of small points which will be more appropriately discussed at the later Committee stage, when refinements might be made to the Bill. However, it may help if I merely mention some of them. The first is a very small one. The date mentioned in Clause 1, defined in Clause 7, is 24th November, 1970, which, I presume, was intended to be the date of the decision by the House of Lords in the case of Singette Limited and Others v. Martin. However, that decision occurred not on 24th but on 25th November, as reported in the Weekly Law Reports.

Mr. Carlisle: The hon. Gentleman is being slightly unkind to the Parliamentary draftsmen. If he looks more closely he will see that the Clause refers to
the period of twelve months ending with 24th November 1970
and, therefore, includes 24th November and goes up to midnight on that day. It therefore goes to the point of the decision on the 25th.

Mr. Morgan: I should have realised from a previous incarnation that there is always a good defence to be made on behalf of the Home Office draftsmen, and I am happy to withdraw the point I made in this connection.
In Clause 1 there is mention of at least 26 competitions during the qualifying period. I presume that the answer will be in the negative, but I would like the Under-Secretary to consider whether it is possible for a single competition to be run on the same date but organised on a local basis in such a way that 26 different areas could be interpreted as 26 competitions. It might be wise to have the hon. Gentleman's views on this, because we need to know precisely what will constitute 26 competitions within the meaning of the Bill.
Clause 1(2) gives the conditions, and we are told that
each of the … competitions … has been to the financial benefit of a society established and conducted wholly or mainly for one or more of the following purposes
and that the three purposes are

"(i) charitable purposes,
(ii) participation in or support of athletic sports or games or cultural activities"
and then the one to which I particularly wish to refer,
(iii) purposes which, not being described in paragraph (i) or (ii), are neither purposes of private gain nor purposes of any commercial undertaking".
Is it intended that that third proviso should be construed ejusdem generis with sub-paragraphs (i) and (ii)? I trust that is not the intention and I hope that, if there is any doubt about it, the necessary Amendments will be made.
After all, if it were the intention, we would find ourselves back with some of the ironic cases, relating to charities, which students will recall from their reading of Snell's "Equity". Hon. Members will recall some of the gruesome distinctions which were then made. For example, a trust to promote "Conservative principles combined with moral improvements" was held to be charitable, while a trust for patriotic purposes, or for helping to carry out the work of the Church in Wales, were held to be other than charitable. We do not want to perpetuate any such distinctions which

were laid down in a decision of some 80 years ago and which echoed many of the inconsistencies of Elizabethan charity law.
Can the Under-Secretary give an indication whether the Gaming Board, which, after all, will be exercising very wide discretion in this matter, though obviously it will not exercise it in a capricious or arbitrary way, will make some public statement as to general lines of policy which will be pursued in relation to the granting of licences under Clause 1? Will art annual report be prepared? If so, will it be debated in Parliament?
I assume that "Spot the Ball" competitions will in no way be affected by this legislation. However, under Schedule 2(13) of the Betting, Gaming and Lotteries Act, 1963, we are told:
Subject to paragraphs 14 and 19 of this Schedule, the pool betting business carried on by any registered pool promoter shall comply with the following requirements—
(a) it shall take the form of the promotion of competitions for prizes for making forecasts as to sporting or other events".
If one is dealing with an event already past, then afterwards a competition about it can by no stretch of the imagination or use of language be regarded as a forecast. If so, I ask the Under-Secretary to consider between now and the next stage of the Bill whether in legislating to bring about within a narrow compass a limited legislation on lotteries it is right to leave out these "Spot the Ball" competitions. Now that society accepts that, within the defined sphere relating to charities, it is right and proper that substantial exemptions should be made in the generality of the law relating to lotteries, is it any the less moral to conduct "Spot the Ball" competition lotteries for charitable purposes within the football lotteries with which we are dealing in this legislation?
The hon. and learned Gentleman said that it was the intention of the Home Office to set up a study. The Under-Secretary was presumably referring to a Departmental committee which will scrutinise the whole sphere of legislation relating to lotteries. May we be given the terms of reference of that body? When is it likely to report?
I warmly congratulate the Under-Secretary on the Measure. It stems from,


a genuine compassion with worthy charities which have been deprived of a significant part of their income. It is in the public interest that they should be protected within the limits of the Bill. It is, I believe, also in the public interest that they should be free from the threat of private prosecution either at the hands of assiduous zealots or rival promoters. The system proposed in the Bill is, in general, a flexible, albeit a rather arbitrary one. However, it would have been difficult to have improved substantially on the basic features of this legislation. I have no doubt that when it is given its Second Reading, as I trust it will be, and is debated in Committee, a number of small refinements will be proposed. In general, therefore, on behalf of my hon. Friends I wish the Bill well.

11.26 a.m.

Mr. Alan Fitch: We have heard two excellent and lucid speeches from the Under-Secretary and my hon. Friend the Member for Cardigan (Mr. Elystan Morgan). While I do not intend to detain hon. Members for long, there are some observations of a general nature I wish to make.
In my constituency I have two teams, Wigan Athletic Football Club and Wigan Rugby League Club, both of which are at the top of their respective tables, I am glad to say. From being present at their games and from my knowledge of these matters I accept that sport generally has done a great deal to enrich our lives. It would be a sad day indeed if clubs had to go out of existence through lack of money. I therefore welcome the Bill.
During the 1969–70 season, of the 92 clubs in the four football leagues, only 11 made a profit. This illustrates once again the need for the opportunity which the Bill will give to clubs to continue with the necessary job of raising funds.
There is the same picture in cricket, and I pay tribute to the Warwickshire County Cricket Supporters Association for the tremendous job which its members have done in giving help on a nationwide scale to the Cricket Council, the County Cricket Club, the M.C.C. and countless village and small cricket teams. The same applies to organisations which are raising money for polio and cancer research. Their work would be greatly inhibited but for this Bill.
This Measure does not encourage heavy gambling. I accept that heavy gambling can bring with it a degree of social irresponsibility. In this case, the stakes are one or two shillings a week, which in no way can be claimed to be encouraging people to go in for heavy gambling.
There are two points which, while they do not worry me—"worry" would be a term of exaggeration to use in this context—should be reconsidered. One is the qualification of at least 26 competitions in the 12 months prior to 24th November of last year. If this operates as it stands, without Amendment, I know of two well-known First Division clubs which will suffer greatly, and I am sure that there are other, not only sporting, organisations which will also suffer. Therefore, I hope that the Under-Secretary will introduce an Amendment at least to lessen the time and the number of competitions required.
The activities of the Gaming Board are undefined to a certain degree, and there appears to me to be no right of appeal by any organisation which has its application for a licence refused or revoked.
Those may appear to be only small points, but I think that the first is considerable. I do not want to press the Minister too much, because, obviously, representations have been made along these lines. The Bill is good, but perhaps it could be made a little better if we consider at least two of the things I have mentioned.

11.31 a.m.

Mr. Dan Jones: I, too, support the Bill for the reasons which have already been given.
I think that my hon. Friend the Member for Wigan (Mr. Fitch) said that only 11 out of all the football clubs in the country can pay their way. He has made a very valid point which all people, not only those of a sporting character, should appreciate. The country took a very distorted view of what happened at Wembley last Saturday, when two very powerful teams attracted about 40 million spectators throughout the world, and earned an immense amount of money in the process. It is not generally realised that the Cup competition begins in the August of the preceding year. The little clubs which keep good communities going


can do so only in the manner outlined by my hon. Friend. In my constituency for many years we have had a Division 1 club running on a gate of about 15,000, which is totally inadequate to meet the financial demands. We have managed to survive in the way my hon. Friend described.
I hope that these considerations will be borne in mind, particularly in relation to the Minister's reference to the House of Lords decision, as a result of which, unless there is a regulator such as the Bill provides, those very happy facilities may be prejudiced.
There is throughout the country a large number of working men's clubs which do yeoman service for their members and others. Old-age pensioners are taken for outings to the seaside, and provided with teas and concerts, and the same good work is done for children at various times of the year. Those clubs do a remarkable job. This work changes the whole character of clubs. They cease to be like public houses, places where people go only to drink. There is a community spirit. Many churches and chapels, too, are involved in various kinds of what are called, for want of a better word "sweeps". Some of us may be aware of this with certain misgivings, but their position also deserves to be acknowledged.
I do not gamble. I have never had the means whereby I was entitled to do so. If, however, the gambling instinct is prevalent in the nation I would strenuously support those agencies which turn to the benefit of society that human characteristic. The Bill is a move in that direction.
The Minister mentioned a forthcoming review, and he and my hon. Friend the Member for Cardigan (Mr. Elystan Morgan) turned their legal minds to the matter. When the legal boys are talking, others listen with some degree of apprehension. Being a non-legal man I can thoroughly understand that apprehension: nobody can be sure which way those chaps are going. If as a result of the Bill schemes are to develop along perhaps more ambitious lines, those concerned have a right to know what bearing the review will have on the legislation, so that those who, by and large, do a very stout job within our social fabric can plan along lines which are coordinated, and understood by them.

11.37 a.m.

Mr. Carlisle: With the leave of the Committee, perhaps I may reply very briefly to the points made, and thank hon. Members for their welcome for the Bill. I thank the hon. Member for Cardigan (Mr. Elystan Morgan) for the very kind things he said about the Home Office and about me for bringing the Bill forward.
The hon. Member for Burnley (Mr. Dan Jones) and the hon. Member for Wigan (Mr. Fitch) rightly made the point that as well as the charities which benefit from the Bill a number of major sporting clubs also benefit. I shall say something about Warwickshire County Cricket Club in a minute. It is only the major, substantial schemes which are saved by the Bill. I think that lotteries run by the working men's clubs or any forms of charitable club are all run under the existing provisions for small lotteries which were allowed in the Betting, Gaming and Lotteries Act, 1963, whereby any club, provided that it is not for private gain or commercial purposes, can organise a small lottery, that being one in which the entrance fee is not more than a shilling a ticket, in which any individual prize does not exceed £100, and the total value of the tickets must not exceed £750. It is under that provision that the vast majority of the lotteries which we come across in our everyday life, in religious and political organisations, clubs and so on, exist.
Certainly, within the review we shall also be considering the adequacy or otherwise of the law relating to small lotteries. There have been substantial representations to the Home Office in recent months that the limitations laid down by the 1963 Act should be increased. We would prefer not to consider this piecemeal, but in relation to the whole question of the law on lotteries and pool betting as well.

Mr. Elystan Morgan: I had intended in my speech to ask the hon. and learned Gentleman whether the findings of the Departmental committee would be made public. Since it deals with a matter of considerable interest, they should be published.

Mr. Carlisle: My immediate reaction is to say that I would have thought not, but I note what the hon. Gentleman has said. I think that it would be a report


for the Home Office. It is a Departmental inquiry into the law, and will contain recommendations or alterations. It would be unusual for it to be published, though it may be. I shall bear in mind what the hon. Gentleman says, and what publicity may have to be given to any later permanent provisions.
The purpose of the Bill is, pending the outcome of that review, to continue in existence for a temporary period the major schemes already existing from which certain clubs and charities make substantial sums. The Government believe that those charities and major sporting clubs which rely substantially on income from this source should look at alternative sources of income during this breathing period. We cannot guarantee that the permanent legislation we hope to introduce as a result of the review will necessarily continue to legalise these types of pool competition.
We shall look at the question of the qualifying period. I probably have in mind the names of the two concerns which have approached the hon. Member for Wigan. They recently made representations to the Home Office, and we have agreed to consider whether the qualifying period is too extensive. This is purely to preserve the position of those which clearly were at that stage heavily financially dependent on such schemes, and not to cover those who suddenly thought at the last moment that it would be a good idea to try to get on the bandwagon.
The hon. Gentleman is right, I think, in saying that there is no right of appeal against the refusal of a licence. He also referred to what he called the undefined activities of the Gaming Board, and the hon. Member for Cardigan also made a comment about the board's role. In opening I conceded at once that the discretion left to the board is wide.
The hon. Member for Cardigan asked whether it would make any public statements about its future policy. I am sure that the answer to both hon. Members is that the board will take careful note of Parliament's intention in passing this legislation, and will see that this intention is carried out in the way in which it exercises its powers and its discretion.
Clause 2(2) says that in licensing the competitions
The Board shall, so far as practicable, exercise their powers of granting licences under this Act so as to secure that each of the societies named or identified"—
those which up to then have established that they were in the past bodies intended to be saved by the Bill—
in a certificate under this Act will derive financial benefit from competitions …
In other words, it is clear that the intention of Parliament on which the board will act is to continue the existing schemes which it has identified as those which the Bill is intended to save.
Clause 2(3)(b) says that one of the matters it should take into account in deciding any conditions is
the amount of the financial benefit which the society derived from competitions for prizes held in the qualifying period.
In looking at schemes, I am sure that the Gaming Board will take into account the percentages which went to charity in the way in which the schemes were operating, and bear them in mind in deciding whether to lay down conditions about percentages. In other words, the board will take into account the benefit which a society was deriving from a competition while the competition was being run without these additional controls.
The Gaming Board reports annually, and I imagine that reference will be made in subsequent reports to the board's work of administration under this Bill.
With two exceptions, the hon. Gentleman's remaining questions are Committee points. He asked why, if it be the fact, we have left out "Spot the Ball". Secondly, he asks on what basis we justify a Bill which continues what, until a certain date, has been held to be unlawful.
The Bill does not legalise "Spot the Ball". A variety of "Spot the Ball" has been held to be unlawful. We do not attempt to legalise it in the Bill. We are concerned to save the charity or sporting organisation which has been dependent on the income which it has received from a pool competition, whereas, on the whole, the financial benefit of "Spot the Ball" was going to some form of commercial undertaking, often a newspaper. The question of what is a lawful competition with prizes raises all sorts of problems. It is part of the law in which it


would be impossible to legislate piecemeal. Although representations were made to me I was not satisfied that a case had been made out on the grounds of financial dependence which justified an exceptional piece of legislation of this nature in the case of bodies running competitions based on "Spot the Ball". I accept all the arguments. For example, it is said that it is not harmful. Why, therefore, is it unlawful? It illustrates the real mess that competitions with prizes have got into, and it can only be sorted out by a fundamental review.
Finally, the hon. Gentleman asked on what basis I commend a Bill which deliberately sets out to preserve the status quo which is held to be unlawful but does not allow other charities or sporting bodies to enter the same field. My answer is simply that the Bill is based on expediency far more than on principle. It is necessary if the incomes of such bodies as the Spastics Society are to continue, and if the work done by the Warwickshire County Cricket Supporters Club, which, to my knowledge, helps numerous amateur clubs, is not to cease. If those incomes are not to be lost overnight, it is necessary to pass legislation of this kind. It is based on expediency in indemnifying what has been held to be an unlawful form of lottery. I concede at once that it is on the basis of expediency that I comemnd the Bill. I feel that that basis is the only one on which it can be justified.

THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:


Russell, Sir R. (Chairman)
Lipton, Mr.


Bagier, Mr.
Monks, Mrs.


Carlisle, Mr.
Morgan, Mr. Elystan


Fitch, Mr.
Rossi, Mr.


Haselhurst, Mr.
Soref, Mr.


Jones, Mr. Dan
Taylor, Mr. Frank


Latham, Mr.
Taylor, Mr. Robert


Leonard, Mr.
Wilkinson, Mr.

Mr. Dan Jones: Clause 2(2) says:
The Board shall, so far as practicable, exercise their powers of granting licences under this Act so as to secure that each of the societies named or identified in a certificate under this Act will derive financial benefit from competitions for prizes authorised by a licence under this Act.
Does that mean that the board has to take on responsibility for accountancy for these people?

Mr. Carlisle: I should like to consider that before we come to Clause 2 in Committee later. I think that what it means is that the board has a duty to exercise its power to grant licences, where it is satisfied that the societies named have been receiving previously sums of money, in order to secure that they continue to receive them. Clearly, it follows that the board is entitled to lay down a condition about the percentage of the overall money going into the pool which must go to the charity. Certainly the board can do that, and it will be responsible for scrutinising the accounts of the pools promoters and ensuring that they accord with the conditions.

Question put and agreed to.

Ordered,
That the Chairman do now report to the House that the Committee recommend that the Pool Competitions Bill ought to be read a Second time.

Committee rose at eight minutes to Twelve o'clock.

Orders of the Day — Second Reading Committee

Wednesday, 12th May, 1971


[MISS JOAN QUENNELL in the Chair]


The Committee consisted of the following Members:


Miss Joan Quennell (Chairman)


Allason, Mr. James (Hemel Hempstead)
Howell, Mr. Denis (Birmingham, Small Heath)


Ashton, Mr. Joseph (Bassetlaw)




Jessel, Mr. Toby (Twickenham)


Cohen, Mr. Stanley (Leeds, South-East)
Johnson, Mr. James (Kingston upon Hull, West)


Cooke, Mr. Robert (Bristol, West)



Fookes, Miss Janet (Merton and Morden)
Roberts, Mr. Albert (Normanton)


Gorst, Mr. John (Hendon, North)
Rossi, Mr. Hugh (Hornsey)


Griffiths, Mr. Eddie (Sheffield, Brightside)
Tebbit, Mr. Norman (Epping)



Torney, Mr. Tom (Bradford, South)


Gummer, Mr. Selwyn (Lewisham, West)
White, Mr. Roger (Gravesend)


 Harper, Mr. Joseph (Pontefract)
Whitlock:, Mr. William (Nottingham, North)


Heseltine, Mr. Michael (Under-Secretary of State for the Environment)
Woodhouse, Mr. Christopher (Oxford)



Mr. R. B. Sands, Committee Clerk.

Orders of the Day — RURAL WATER SUPPLIES AND SEWERAGE BILL

10.30 a.m.

Resolved,
That if the proceedings on the Rural Water Supplies and Sewerage Bill are not completed at this day's sitting, the Committee do meet on Wednesday next at half-past Ten o'clock. —[Mr. Michael Heseltine.]

The Under-Secretary of State for the Environment (Mr. Michael Heseltine): I beg to move,
That the Chairman do now report to the House that the Committee recommend that the Rural Water Supplies and Sewerage Bill ought to be read a Second time.
My introductory speech can be short. The purpose of the Bill is to remove the limit of £105 million which at the moment controls the level of grants which the Central Government can make to water and sewerage schemes. In a few months' time, if this Bill does not reach the Statute Book we will not have the power to go

on making grants. As all hon. Members of the Committee will know, this scheme has been going on for many years. It is our intention to keep it going and I hope, therefore, that it will not be necessary to go into protracted reasons explaining why this is necessary.

Simply, we believe that the procedures whereby, under the Vote, investigation and parliamentary control is maintained, are adequate, without there being a need to come back to this type of procedure every time we run out of authority.

Question put and agreed to.

Mr. Heseltine: On a point of Order. If it is not too early—or too late—in the proceedings, I must say that I have risen on numerous occasions to thank Chairmen of Committees for their excellent conduct, normally, about four or five months after Bills have been committed


to Standing Committee. I now have pleasure in doing so after four or five minutes. Your conduct has been exemplary, Miss Quennell, and I hope that it will be copied by every other Committee Chairman.

Mr. Joseph Harper: I endorse everything that the hon. Gentleman has said.

THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:


Quennell, Miss (Chairman)
Johnson, Mr. James


Gorst, Mr.
Rossi, Mr.


Gummer, Mr. Selwyn
Tebbit, Mr.


Harper, Mr.
White, Mr. Roger


Heseltine, Mr. Michael
Woodhouse, Mr.

The Chairman: I am most obliged to hon. Members for their co-operation.

Ordered,
That the Chairman do now report to the House that the Committee recommend that the Rural Water Supplies and Sewerage Bill ought to be read a Second time.

Committee rose at twenty-seven minutes to Eleven o'clock.